Strategic collaboration between Burton Hospitals NHS...

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Strategic collaboration between Burton Hospitals NHS

Foundation Trust and Derby Teaching Hospitals NHS

Foundation Trust

Final: Distributed 1 June 2017 for

2017 Trust Board discussions

Outline Business

Case

NB. This document

is accompanied by

an Appendices pack

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Contents

Version control log .............................................................................................................................. 3

Abbreviations ...................................................................................................................................... 4

Foreword ............................................................................................................................................. 5

1. Executive summary .................................................................................................................... 7

2. Introduction ............................................................................................................................. 16

3. Strategic case – the evidence for change................................................................................. 22

4. Economics case – intended benefits ........................................................................................ 41

5. Economics case – Organisational form options ....................................................................... 64

6. The financial case ..................................................................................................................... 74

7. Organisational design ............................................................................................................... 95

8. Programme timeline, governance and management ............................................................ 106

9. Risks ........................................................................................................................................ 119

10. Conclusion .............................................................................................................................. 123

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Version control log Version Date Issued to

1.0 20/01/17 Project Group meeting

2.0 26/01/17 Finance workstream meeting

3.0 01/02/17 Workforce worksteam meeting

4.0 02/02/17

17/02/17

Project Group meeting and workstream meetings Project Group meeting and workstream meetings

5.0 27/02/17 Project Director


7.0 08/03/17 External advisor


9.0 09/03/17 to

11/03/17

Project Director

10.0 11/03/17 Executives team organisational form session 3 meeting


12.0 18/03/17 PD, CEOs, FDs Chair meeting 13.0 24/03/17 Project Group meeting 14.0 24/03/17 PD, CEOs and Chair meeting

SCB meeting 15.0 31/03/17 PD, Chair and CEO meeting

Board meetings 16.0 12/04/17 Project Director 17.0 18/04/17 Project Director 18.0 20/04/17 Project Director 19.0 21/04/17 Project Director 20.0 25/04/17 Directors Finance 21.0 26/04/17 Directors Finance 22.0 27/04/17 Project Director 23.0 17/05/17 Directors of Finance 24.0 23/05/17 Directors of Finance 25.0 25/05/17 Directors of Finance 26.0 26/05/17 Project Director 27.0 12/06/17 Project Director

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Abbreviations

The table below outlines acronyms used in this report.

A&E Accident and Emergency NED Non-Executive Director

ACO Accountable Care Organisation NHS National Health Service

ACP Advanced Clinical Practitioner NHSE NHS England

BCBV Better Care Better Value NHSI NHS Improvement

BCIS British Cardiovascular Intervention Society NHSLA NHS Litigation Authority

BHFT Burton Hospitals NHS Foundation Trust NIA Non Invasive Ventilation

BTA Business Transfer Agreement NPV Net Present Value

CCG Clinical Commissioning Group NTDA NHS Trust Development Authority

CEO Chief Executive Officer NUH Nottingham University Hospitals NHS Trust

CESR Certificate of Eligibility for Specialist Registration OBC Outline Business Case

CIP Cost Improvement Plan OD Organisational Development

CMA Competition and Markets Authority OOH Out of Hours

CPoC Collaboration Proof of Concept OPAT Outpatient Parenteral Antibiotic Therapy

CQC Care Quality Commission PACS Picture Archiving and Communication System

CQUIN Commissioning for Quality and Innovation PALS Patient Advice and Liaison Service

CRHFT Chesterfield Royal Hospitals NHS Foundation Trust PAS Patient Administration System

CRIS Computerised Radiology Information System PBCIP Post Business Case Implementation Plan

CVF Competing Values Framework PCI Percutaneous Coronary Intervention

DCHS Derbyshire Community Health Services NHS Trust PDC Public Dividend Capital

DGH District General Hospital PET-CT Position Emission Topography – Computed Topography

DH Department of Health PFI Private Finance Initiative

DNA Did Not Attend PMI Patient Master index

DTHFT Derby Teaching Hospitals NHS Foundation Trust PMO Programme Management Office

EBITDA Earnings before Interest, Taxation, Depreciation and Amortisation

POD Point of Delivery

ED Emergency Department POLCV Procedures of Limited Clinical Value

EPR Electronic Patient Record PPCI Primary Percutaneous Coronary Intervention

ESD Early Supported Discharge PRM Provider Regulation Meeting

FBC Full Business Case PSHFT Peterborough & Stamford Hospitals Foundation Trust

FM Facilities Management PTIP Post Transaction Implementation Plan

FT Foundation Trust PTL Patient Tracking List

FY Financial Year QIPP Quality, Innovation, Productivity and Prevention

FYFV Five Year Forward View R&D Research & Development

GI Gastrointestinal RIS Radiology Information System

GIRFT Getting It Right First Time SCB Strategic Collaboration Board

GP General Practitioner SCC Spinal Cord Compression

GSTS Guy’s & St Thomas’, Kings College & Serco SFHFT Sherwood Forest Hospitals Foundation Trust

HASU Hyper Acute Stroke Unit SFI Standing Financial Instruction

HEFT Heart of England Foundation Trust SHMI Summary Hospital-level Mortality Indicator

HHCT Hinchingbrooke Healthcare Trust SIFT Service increment for Training

HMRC Her Majesty’s Revenue & Customs SJCH Samuel Johnson Community Hospital

HMT Her Majesty’s Treasury SLA Service Level Agreement

HoT Heads of Terms SOC Strategic Outline Case

HR Human Resources SRO Senior Responsible Officer

HSMR Hospital Standardised Mortality Ratio SRPCH Sir Robert Peel Community Hospital

I&E Income and Expenditure SSNAP Sentinel Stroke National Audit Programme

ICD Implantable Cardioverter Defibrillator SSoTP Staffordshire and Stoke on Trent Partnership NHS Trust

ICU Intensive Care Unit STF Sustainability and Transformation Fund

IM&T Information Management & Technology STP Sustainability and Transformation Plan

ISAS Imaging Services Accreditation Scheme SVCO Superior Vena Cava Obstruction

IT Information Technology SWLEOC South West London Elective Orthopaedic Centre

JAG Joint Advisory Group (JAG) T&O Trauma & Orthopaedics

JCF Junior Clinical fellow TIA Transient Ischaemic Attack

JV Joint Venture TUPE Transfer of Undertakings (Protection of Employment) Regulations 2006

KPI Key Performance Indicator UHB University Hospitals Birmingham Foundation Trust

LHE Local Health Economy UHCW University Hospitals of Coventry & Warwick Trust

LIFT Local improvement Finance Trust UHL University Hospitals of Leicester NHS Trust

LRCH London Road Community Hospital UHNM University Hospitals of the North Midlands NHS Trust

LTFM Long Term Financial Model UHNS University Hospitals of North Staffordshire NHS Trust

MDs Medical Directors UoR Use of Resources

MDT Multi-Disciplinary Team VAT Value Added Tax

MES Managed Equipment Services We Derby Teaching Hospitals NHS Foundation Trust and Burton Hospitals NHS Foundation Trust

MOU Memorandum of Understanding WLI Waiting List Initiative

MP Members of Parliament WTE Whole Time Equivalent

MSFT Mid Staffordshire NHS Foundation Trust

MTC Major Trauma Centre

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Foreword

The challenges facing the NHS nationally are well recognised; rising demand for services, increasing

public expectations, advances in technology and medical practice, together with constrained public

finances whilst the country seeks to restore its economic health. This was underlined in the

publication of the NHS Five Year Forward View in 2014 which launched a search for new ways of

working to meet these challenges. Increasingly, organisations across the country are recognising that

co-operation and partnership are more likely to deliver solutions than competition and isolated

independence.

Both Burton Hospitals NHS Foundation Trust and Derby Teaching Hospitals NHS Foundation Trust are

at the forefront of this changing approach. Both are fully engaged within their local health

economies as part of the Sustainability and Transformation Plan process which seeks to develop

more integrated services working with other partners in primary care, community, mental health

and social care to provide joined up care for people in Derbyshire and Staffordshire. However, we

also recognise that as near neighbours there is an opportunity for our hospitals to build on our long

established relationship and forge an even closer partnership for the future. We are facing many

similar challenges and firmly believe that by working together we are better placed to meet them.

This Outline Business Case follows on from the Strategic Outline Case approved by both Boards in

October 2016 and is the product of an intensive programme of work delivered by both Trusts

working together to set out a vision for how this partnership might develop and the outline benefits.

In doing this work our aim is to explore how our Trusts could work together to improve the quality of

our services, sustain local access to important acute hospital services, better use our community

sites and also meet the financial challenges we face.

We have been hugely impressed by the spirit in which our teams have engaged with this work.

Although the organisations have different histories and experience, this is a partnership of equals

which celebrates the differences and seeks to build on the best that both Trusts have to offer.

As part of this work we have explored:

How we could deliver better services to the communities we serve by clinical services working

together

How we could reduce the duplication in support services to reduce our overheads

And finally we have considered what the best type of relationship might be to deliver the

emerging benefits.

We believe that these benefits are substantial including:

Opportunities to provide better access for patients by maintaining and developing the services in

our community hospitals at London Road, Lichfield and Tamworth to become a focus for the

‘place-based’ models of care we are developing as part of the Sustainability and Transformation

Plans in Derbyshire and Staffordshire

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Sustaining important local services, particularly at Burton Hospitals Foundation Trust through

the benefits of scale offered by working together

Enabling Derby Teaching Hospitals Foundation Trust to grow the catchment population to

develop and sustain its specialist services and thereby securing access to them for people in

Staffordshire and Derbyshire

Improving the quality of services offered by sharing learning and best practice

Reducing duplication in our support services and lowering the overhead costs, releasing funds

for front line patient care.

In conclusion, we firmly believe that by working together we can meet our challenges and achieve

the benefits described. There is a long established relationship between the two Trusts but we now

want to take our partnership to the next level by working much more closely together than ever

before and delivering our services in an integrated way.

We commend this Outline Business Case to you, its suggested direction and recommendation to

build on this work and develop the preferred option proposal for merger (through a legal acquisition

route) via the development of a Full Business Case and Post Transaction Implementation Plan.

Gavin Boyle Helen Scott-South

Chief Executive Chief Executive

Derby Teaching Hospitals NHS Foundation Trust Burton Hospitals NHS Foundation Trust

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1. Executive summary

This Outline Business Case (OBC) sets out the further work done following the approval of the

Strategic Outline Case (SOC) by both Trust Boards in October 2016.

The OBC describes the following:

Emerging clinical models developed through detailed work between clinical teams at Burton

Hospitals NHS Foundation Trust (BHFT) and Derby Teaching Hospitals NHS Foundation Trust

(DTHFT) demonstrating how clinical services could be operated more effectively and

sustainably in an integrated form

Achievable efficiencies through the delivery of combined shared services and the reduction

of duplication

A financial benefit of £23.0m (risk adjusted) recurrently by 2021/22 in addition to existing

cost improvement requirements of the standalone organisations.

The OBC recommends:

The creation of a new organisation, to deliver these benefits by a merger via acquisition.

The development of the FBC and integration plans to deliver the clinical and financial

benefits presented in this OBC.

Introduction and background to this work

1. Along with the rest of the NHS, BHFT and DTHFT are experiencing clinical, operational and

financial challenges which are increasing over time as rising patient demand and workforce

issues become more acute. These pressures have impacted on our annual performance against

national quality and operational performance standards. Both Trusts struggled to deliver on

some performance measures in 2015/16. Whilst some improvements have been demonstrated

in 2016/17 we are facing challenges in consistently meeting our performance targets. Both

Trusts have faced significant financial challenge in recent years and had a combined in year

financial deficit of £20.6m (£42.4m without the Sustainability and Transformation Fund (STF)

allocation) for 2016/17, this includes:

DTHFT actual deficit of £12.4m (£26.7m without STF); and

BHFT actual deficit of £8.2m (£15.7m without STF).

2. Neither Trust is financially sustainable on its own. Some general services at BHFT are not

clinically sustainable and some specialist services at DTHFT do not have a sufficiently large

catchment population to make them secure under current specialised commissioner criteria. We

have both considered the options for securing our future sustainability and believe that a formal

strategic collaboration between the two Trusts is likely to be the best way to address our specific

sustainability challenges, and enable us to continue to provide a full range of services for our

local populations.

3. A SOC was presented to and approved by both Boards in October 2016. Both Boards agreed to

progress to an OBC with the scope of work including to:

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Further develop the collaboration proposals to deliver clinical and financial improvements

for our populations and

Further explore the options of group structure or merger organisational form models as

routes to deliver improvements for our populations.

4. This OBC aims to recommend to the Boards the form of strategic partnership between BHFT &

DTHFT (group structure or merger) that most improves:

NHS services provided by both parties for the benefit of populations served

The financial positions of both Trusts and, therefore, the financial position of the local health

economy

5. This OBC will support the Boards to determine whether the benefits are acceptable to proceed

with the development of a Full Business Case (FBC) for the preferred organisational form.

Strategic case - Evidence for change

6. A number of external factors contribute towards the case for change although there are also

significant internal challenges that make the case for change compelling. The overarching case

for change is that with collaboration we can ensure the continued and enhanced delivery of high

quality services to our patients and that without it our ability to do this is compromised.

External Factors

National Picture – the demands for NHS services continue to rise putting pressure on

already strained services and increasing the financial challenges for the NHS. The FYFV

proposed new models of care to support the NHS developing new ways of working that

could address the sustainability challenges it faces including through acute collaborations.

There is a national expectation that more radical innovation is needed to meet the

challenges of the NHS and this OBC seeks to identify how we rise to this challenge

Local Picture – the funding gap – across the two Sustainability and Transformation Plans

(STPs) (Staffordshire and Derbyshire) that the Trusts are part of, there is a forecast funding

gap of £506m by 2020/2021. Both STPs focus on avoiding potential cost and remedying

underlying deficits faced by organisations. By collaborating across our acute services we aim

to contribute to lower per capita costs for our population and reduce variation in outcomes

for the populations we serve whilst improving the patient experience.

Local Picture – partnerships, networks and competitors – there are a large number of other

providers which creates both competition and the opportunities for networking and

partnering. The collaboration between our Trusts will improve our ability to maintain and

expand our market share and also build on the wide range of existing clinical networks we

have across the East and West Midlands to provide greater choice for patients when

deciding where to receive their care.

Internal Factors

Clinical sustainability – there are a number of specialised services currently provided by

DTHFT such as cancer surgery for which there are nationally recommended minimum

population sizes where DTHFT’s catchment population is insufficient – the collaboration will

provide DTHFT with access to this wider population. For BHFT the risk is for standard

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secondary care services which are threatened due to the low volumes of clinical activity (e.g.

stroke) which leads to difficulties in recruiting and maintaining a stable workforce.

Financial Sustainability – both Trusts are financially unsustainable in their current form with

an estimated combined ‘do minimum’ deficit by 2021/22 of £37.5m whilst the collaboration

will not resolve this it will enable the Trusts to improve their combined position.

Estates Utilisation – DTHFT is made up of a new PFI acute hospital and a community site

based in Derby. BHFT sites consist of one acute hospital in Burton upon Trent and two

community hospitals situated in Tamworth and Lichfield. The collaboration will enable both

Trusts to develop a joint estate strategy across all of its sites ensuring the best use is made

of the estate.

Options appraisal and preferred option to take forward

7. The SOC identified a wide range of potential organisational forms. Both Boards approved that as

part of the OBC we explore further the options of merger and group structure forms against the

status quo. As part of developing this OBC we explored the merger together with four variants

for the group structure model including:

Group structure via corporate Joint Venture

Group structure via contractual Joint Venture

Group structure via committees in common

Group structure via a hybrid model including committees in common and contractual JV.

8. Three sessions were held with both Executive teams. Four Non-Executive Directors (two from

each Trust) were present at the last two of these sessions. The last two sessions scored the

shortlist of options after considering further evidence and legal advice on all group structure

variants. The four options that were scored by Executive Directors in the last two sessions,

against the evaluation criteria, included:

Status quo/do minimum

Full merger (by legal acquisition)

Group structure via committees in common

Group structure via a hybrid model including committees in common and contractual JV.

9. Each option (alongside the status quo) was evaluated against four key criteria areas including:

Quality and Sustainability – 40% weighting

Financial impact – 30% weighting

Strategic alignment – 15% weighting

Deliverability – 15% weighting

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10. The table below shows the outcome of the scoring (out of a total possible score of 500) with

merger option scoring the highest score (439/500 – 88%):

Figure 1: Scoring of organisational form options

Description

Weighted average score

Quality &

Sustainability Financial

Strategic

alignment Deliverability

Total

(scored out of

a possible 500)

Full merger via

acquisition 197 / 1

st 138 /1

st 58 /1

st 47 / 2nd 439 / 1

st

Group structure via

Hybrid model 157 / 2

nd 105 / 2

nd 51 / 2

nd 42 / 3

rd 355 / 2

nd

Group structure via

committees in common 115 / 3

rd 95 / 3

rd 45 / 3

rd 42 / 3

rd 297 / 3

rd

Status Quo 67 / 4th

60 / 4th

45 / 3rd

52 / 1ST 223 / 4th

Source: Organisational form session 3 – March 15 2017

Intended benefits (for patients, staff, commissioners and other stakeholders)

11. The clinical and patients benefits case provides examples of new models of service delivery

which would be provided by a combined Trust. These models would provide better patient

outcomes and patient experience, improve workforce sustainability and increase operational

performance. Examples outlined within the OBC include endoscopy, radiology, orthopaedics,

stroke, breast screening and surgery, A&E, cardiology, oncology, upper GI cancer and acute

medicine. The shared services benefits, to support delivery of our clinical services, are outlined

for HR, operations, medical records, IT, finance and procurement. These would be reconfigured

to provide a responsive efficient and adaptable service with standardised processes and unified

teams providing a consistent level of performance. The risk adjusted financial benefits under a

merger for the clinical case are £5.6m and for the shared service case are £5.0m, by 2021/22.

There are also additional financial benefits from a reduced interest liability of £0.6m over the 5

years, due to the delivery of clinical and shared service plans reducing the level of cash

borrowings/PDC dividend paid, and an additional 0.5% of merger synergies amounting to

£11.8m in years 19/20 to 21/22, increasing the total financial benefit to £23.0m over the 5 years

to 2021/22 under a merger scenario.

12. Staff benefits include the development and scaling up of newly evolving roles such as junior

clinical fellows and advanced clinical practitioners which will help to secure and retain a stable

workforce. The larger organisation will also provide opportunities for staff to try new

employment paths without having to leave the organisation thereby supporting staff retention.

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Financial case

13. The Trusts are committed to improving services for our populations, and with this achieving the

most efficient use of our resources and also improving our financial position.

14. The SOC identified potential financial benefits by 2021/22 of £17.6m p.a. as a single

organisation, risk adjusted to £10.1m p.a. to account for delivery risk.

15. Since then, in this OBC, further work has been carried out through a series of deep dives with

both clinical and shared service teams. We have consolidated our understanding of the financial

benefits since the SOC and have greater confidence of their delivery, such that this OBC has

increased the overall value of the merger financial benefits to £23.0m (risk adjusted) including:

Identified plans that will deliver £14.1m p.a. risk adjusted to £11.2m p.a. to account for

delivery risk by 2021/22. 80% of these savings are from cost reduction with the

remaining balance reflecting additional contribution from repatriation / growth.

Plans to be developed for £11.8m from 2019/20 to 2021/22. This represents an

additional 0.5% reduction of operating expenditure. Further work will be undertaken for

the FBC to develop these plans including exploring:

1. Additional areas where best practice from one Trust can be adopted across both Trusts.

2. Assessing the opportunities to deliver additional activity at a marginal rate – the current

assumption is that this will be delivered at full cost.

3. Reviewing those areas where collaboration opportunities have not been identified yet.

16. By 2021/22, the deficit of the (risk-adjusted) merged Trust is forecast to be £20.1m. Assuming

the access to Sustainability & Transformation Funding (STF) in 2021/22 is on the same basis as in

2018/19 then, the merged organisation would be eligible for £18.1m which would reduce the

deficit to circa £2m. The phasing of the merger savings currently indicates that year 4 would be

the first where the organisation is eligible for this STF.

17. The merger financial benefits are in addition to the Cost Improvement Plans (CIP) of both

current organisations (recurrently £103.8m over 5 years within the base case). Through merger

the combined transformation team and integration itself will better enable the delivery of the

baseline CIPs as well as the merger financial benefits. Cumulatively by 2021/22 this equates to

15.3% combined CIPs and synergy efficiency from the merger.

18. The forecast cash position has been estimated based on existing working capital support

increasing by the forecast I&E deficits and additional repayments associated with the Private

Finance Initiative, Managed Equipment Services and prior loans. It is estimated that even under

a merged Trust the combined Trust require £191m more cash support than in 2016/17 (from

£387m in 2016/17 to £578m in 2021/22). This includes the receipt of STF in years 4 and 5.

19. In section 6.3 we have further explored modelling a scenario of external transitional funding for

the PFI element of the structural deficit. In the scenario the deficit could be reduced to a

breakeven position by year 5 and the organisation will also have been control total compliant

and eligible for STF in all years post-merger.

20. In addition to exploring further opportunities in the FBC stage for collaboration we are

committed to the principle that in developing the FBC we will seek to identify savings which

show the deficit improving or at least not getting worse irrespective of the resolution of the

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structural deficit issue. To this end we would recommend that in the FBC, the base case is

developed.

21. In summary, the standalone positions of the two Trusts remain in significant deficit positions,

whereas the merger opportunities described in the base case result in a £2m deficit by year 5

which is a significant improvement. However, this still relies on receipt of STF which only

becomes available in years 4 and 5, if the existing criteria remain. This means that the combined

organisation still has significant cash problems, has no STF receipts in the early years and has

restricted, or no access to capital due to failure to achieve the set control total. Under the

scenario modelled, the position improves significantly due to the receipt of tapered transitional

support which also allows the organisation to access STF for all 5 years of the plan.

Our joint vision, values, objectives and clinical strategy for the proposed organisational form

22. The current visions, values and objectives for each organisation share commonalities. A draft

vision and draft set of values and objectives has been included within this OBC, recognising

further work is required to develop and agree these with our stakeholders. The organisational

design strategy for the new Trust will outline how we will design the new organisation and

create a new culture building on the existing cultures of the two organisations.

23. Our emerging clinical strategy has been developed with the involvement of front-line clinical

staff, non-clinical staff, as well as the senior leadership teams from both organisations. Given the

proximity between our two main hospital sites, we share a large proportion of our combined

population; there are opportunities to deliver better outcomes and benefits for patients via

creating one clinical strategy, alongside working within both STP footprints to deliver local health

services. The emerging clinical strategy is illustrated in the figure below

Figure 2: Emerging clinical strategy of both Trusts

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Organisational design of the recommended option

24. We recommend that a legal acquisition of BHFT by DTHFT be considered as part of this OBC, as

the most appropriate route to forming a combined Trust for practical and financial reasons.

These include lower costs of transferring assets and also considering DTHFT’s status as a

‘teaching hospital’ would transfer to BHFT. In all other ways, the collaboration will be

approached as a merger between two equal partners, effectively forming a new organisation as

a result. We are committed to pursuing a true partnership of equals between the two Trusts.

25. We recommend that during the FBC phase a proposal be developed for a new name for the

combined organisation. Our intention is to develop a name that reflects the wider population

developed with our stakeholders as we go through the next phases of the collaboration work.

26. We are currently working to align the structure of our clinical divisions. In collaboration, these

models would be merged to provide cross-site leadership, based on the triumvirate model. Each

division would have a divisional director, divisional nursing director and a divisional medical

director. All corporate functions would be combined to provide consistent and cost effective

shared services across the new organisation. The overarching governance and operating

structures for the proposed enlarged Trust have also been considered and are presented in this

document.

27. The operational and management structures proposed would be underpinned by aligning the

culture and values of both our organisations, based on our common PRIDE ambitions. We would

begin our programme of Organisational Development at FBC stage and this would continue into

post-implementation.

28. There are a number of different workforce implications from the integration associated with the

preferred organisational form of merger and the legal route proposed. A clear set of principles

will need to be agreed, to inform the design of the process to transition staff into the new

organisation, this will form part of the implementation plans.

Programme timeline and governance

29. Subject to the OBC being approved at both Boards and agreement of the resource to proceed to

FBC, an indicative timeline has been included in the OBC that highlights a high level plan

proposing to complete the FBC in October 2017, and proposes a final implementation date of

the new organisation of 1 April 2018 (subject to agreement and regulatory approvals). Public

engagement would also commence, subject to local purdah rules, in June 2017 (after June 2017

Boards) and continue through to the FBC delivery, with feedback and views feeding into the FBC.

Through the FBC phase we will need to undertake a due diligence exercise1 to assure our Boards,

and subsequently our regulators, that the FBC is comprehensive and robust. We will also need to

provide evidence to the Competition and Markets Authority (CMA) of the impact of the merger

on patient choice, competition and the benefits arising from the merger for them to determine

whether the proposed transaction is in the best interest of the patients. We are in the process of

1 See section 8.4, in the main, due diligence is undertaken on the Trust which is being acquired. The proposals relating to due diligence as

outlined in this OBC for the most part are assumed to be undertaken on BHFT (as the smaller organisation, to contain costs). In this instance, BHFT are also proposing to undertake external financial due diligence on DTHFT to satisfy our Board and our external stakeholders, given DTHFT’s unresolved structural deficit relating to the PFI.

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procuring external support to assist us with the due diligence and other regulatory requirements

including responding to the CMA.2

30. We have identified the resources required to complete the programme of work over the next

three years. This will be a mixture of internal and external capacity to support the delivery of the

programme and resources to cover the cost of change. The estimated costs are:

FBC 2017/18 £1.5m – for the 6 months to deliver the FBC; and

Transitional integration costs 2017/18: £1.2m, followed by £2.6m in 2018/19 and then

£1.0m in 2019/20.

Risks

31. We have considered the risks and mitigations associated with each option i.e. not proceeding

with a merger and proceeding with a merger.

32. The key risks associated with not proceeding with a merger include that we would be unable to

individually materially improve service quality, patient experience or clinical and financial

sustainability. BHFT would be exposed to the risk of a diminished position within the

Staffordshire STP and both Trusts may be unable to find alternative suitable partners. Mitigating

actions include ensuring sufficient accurate detail is provided to outline the benefits of a merger

including clinical and financial benefits. A contingency plan should be developed, should the

option of merger not be agreed, to ensure the sovereign Trusts remain integral to the work of

the STP.

33. The key risk of proceeding with a merger is that there are diseconomies of scale associated with

large organisations, including slower responsiveness and reduced communication. Mitigation

actions should ensure governance arrangements for the merged organisation are agile and

responsive.

34. The key risks associated with mobilisation are related to our organisational capacity and cultural

cohesion. There may be challenges with maintaining internal grip whilst implementing the new

organisational form and there is a risk of lack of support from staff groups. In addition, failure to

obtain CMA approval at Phase 1 investigation would likely result in substantial costs and at least

6 months delay to the current transaction timetable. Mitigating actions include the

development and implementation of an OD programme to support the large scale change and to

provide time (through PAs) and support (through project team) to operational and clinical staff

for their input into development of both the FBC, the PTIP and the competition case. External

support will be commissioned to develop the patient case to ensure the patient benefits of

merger are clearly and accurately shown. In addition, a consistent staff and public engagement

programme will be undertaken across the hospital sites and the populations served.

Conclusion

35. During the OBC phase of work three workshops were undertaken to consider the options for

organisational form to deliver clinical and shared service collaboration benefits. Of these options

(status quo; group structure via committees in common; group structure via hybrid model and

2 See section 8.5.2 for estimated programme costs including CMA Stage 1 review. At this stage we have excluded CMA stage two review

costs, further to be developed in FBC if required – see section 2.3.

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merger by acquisition), merger was found to be the recommended solution to deliver quality

and sustainability benefits as well as financial benefits. Merger was also the form which most

aligned strategically, but was less favourable in relation to deliverability challenges with

stakeholder support and ease and speed of implementation.

36. A range of engagement and briefing activities have already been undertaken and these will be

built upon as we go forward. These have included interactive workshops for staff and the

general public with Trust Executives, and regular question and answer briefings for Governors.

There has also been wide stakeholder engagement to date including through our Patient

Reference Group and both Councils of Governors. With wide stakeholder support to date from

CCGs and local Healthwatch. A Staff Reference Group commenced in March 2017 to see to

involve staff at all levels from both Trusts in the programme of change.

37. Both Boards are asked to approve the OBC and its recommendation of the preferred option

(merger of our two Trusts via DTHFT legally acquiring BHFT) for further development into an FBC

and PTIP, by the end of October 2017.

38. The next stage of work will require up to £1.5m for the 6 months of costs associated with FBC

delivery by the end of October 2017. The Boards should consider whether to self-fund the FBC

development cost as the most likely route to deliver the work on time or consider whether to

further pursue external funding, however as this will not be secured until June 2017, there will

be a risk to delivery of FBC in October 2017.

39. A further request for external funding will also be made for the transitional costs which occur

after November 2017 amounting to c£4.8m.

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2. Introduction

This section sets out:

The background to this work, it follows the SOC approved by both Trust Boards in October 2016

The aims of this OBC and our approach to the OBC work The purpose of the next phase of work, the FBC and items to be refined within it.

2.1 Background to this work - the SOC

DTHFT and BHFT have an overlapping population base, operating 11 miles apart. Along with the rest

of the NHS, both BHFT and DTHFT are experiencing clinical, operational and financial challenges

which are increasing over time as, for example, rising patient demand and workforce issues become

more acute. These pressures impact on the annual performance against national quality and

operational performance standards. Both Trusts struggled to deliver on some performance

measures in 2015/16, and whilst improvements have been demonstrated in 2016/17 we are facing

challenges consistently meeting our performance targets (see Appendix 1 and 9). Both Trusts have

faced significant financial challenge in recent years and had a combined in year financial deficit of

£20.6m (£42.4m without STF) for 2016/17, this included:

DTHFT deficit of £12.4m (£26.7m without STF) driven by its structural deficit of ~£20m (£15m

attributable to PFI costs and £5m due to low allocation of medical trainees) and

BHFT deficit of £8.2m (£15.7m without STF).

A combined total of £21.8m was received for STF incentive funding due to performance in 2016/17,

this included £7.5m for BHFT and £14.3m for DTHFT via both achieving the financial control totals for

the year and then be eligible for subsequent bonus amounts.

Neither BHFT nor DTHFT are financially sustainable on their own. Some general services at BHFT are

not clinically sustainable and some specialist services at DTHFT do not have a sufficiently large

catchment population to make them secure. A strategic collaboration programme of work was

established in 2016 to answer two key questions, outlined in the figure below.

Figure 3a: Key questions and principles for the collaboration SOC phase

Key question 1

Does a form of strategic partnership between BHFT and DTHFT improve: o NHS services we both provide resulting in a benefit for the populations

we serve? o Our combined financial position and, therefore, the financial position

of the local health economy?

Key question 2

What form of strategic partnership between BHFT and DTHFT is the most appropriate to deliver these improvements?

Source: SOC Project Initiation document May 2016

Both our organisations have considered the options for securing future sustainability and have

decided that some form of strategic collaboration between DTHFT and BHFT is likely to be the best

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way to address the specific sustainability challenges, as outlined in the SOC approved by both Boards

in October 2016. Two forms of strategic partnership were approved by the Boards to be explored

further in this OBC. These are group structure forms and merger.

2.2 Purpose of the OBC

This OBC considers and recommends the preferred organisational form of strategic partnership

between BHFT and DTHFT. It builds on the work of the SOC and aims to address two key questions

and two core underlying principles, as agreed by both of our Boards in the Memorandum of

Understanding (MOU) dated Dec 2016, outlined in the figure below.

Figure 3b: Key questions and principles for the OBC to address

Key question 3

Which form of strategic partnership between BHFT & DTHFT (group structure or merger) most improves: NHS services provided by both parties for the benefit of populations served The financial positions of both Trusts and, therefore, the financial position of

the local health economy

Key question 4

Are the benefits identified for the preferred organisation form acceptable to both Boards, to proceed with the development of a Full Business Case for the preferred organisation form?

Principle 1 BHFT will remain a vibrant District General Hospital (DGH): Our description of a ‘vibrant DGH’ is one that provides acute care for the local population including an emergency department, obstetrics, paediatrics, access to surgical and medical services, with the requisite services to support these, for instance intensive care. The service offering will ensure the hospital can attract sufficient and high calibre staff to treat and care for local patients.

Principle 2 DTHFT will have access to a larger population across which to plan its services: NHS England (NHSE) requires population catchment areas over one million for certain specialist services to demonstrate that the medical teams maintain their clinical competencies. A larger population catchment will not only help protect and reinforce specialist services, but also to attract, develop and retain a sustainable workforce.

Source: DTHFT and BHFT Memorandum of Understanding December 2016

For further detail relating to the objectives of the OBC - see Annex 1 MOU. The key outcomes set out

in the MOU include the following:

Further clarify and agree the clinical and financial benefits case (including quantification of

financial benefits) for the two potential organisational forms identified in the SOC.

Identify and agree the preferred organisational form for the partners and supporting

organisational structure.

Agree a shared vision for future clinical service provision for the partnership.

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2.2.1 Programme infrastructure

The governance structure outlined below was put in place to oversee the overall programme of

work to consider opportunities for a strategic collaboration between us.

Figure 4: Governance and project management structure DTHFT and BHFT collaboration – OBC phase

Further detail on the scope of work in these workstreams is outlined in Appendix 2, with additional

detail on the deep dive approach for clinical and shared services outlined in Appendix 3 and 4

respectively.

2.3 Purpose of an FBC

Subject to the approval of the OBC, an FBC will be produced according to timelines agreed by both

Boards and the regulators. The FBC will be the document upon which the final decision by the

Boards will be made on whether the two organisations should merge. If it is approved, it will be sent

to regulators for review and approval. The FBC will include the main conclusions contained in the

body of the OBC but with a more detailed review of both organisations, the case for change and the

opportunities and risks associated with any future transaction. Significant additions are outlined in

the figure overleaf.

Sustainability and Transformation Planning (STP) Derbyshire & Staffordshire

Clinical Reference Group Nigel Sturrock/Magnus Harrison Cathy Winfield/Paula Gardner

Patient Reference Group Cathy Winfield/ Paula Gardner

Workstream 1 Due Diligence

Exec Leads: Trust CEOs

BHFT Trust Board DHFT Trust Board

Workstream 3a – Clinical Deep dives

Exec Leads: Medical Directors

Workstream 5 Engagement

Exec Lead: Director Comms BHFT

Workstream 6 Corporate Governance and organisational form

Exec Leads: Director of Governance BHFT/ Trust Secretary DHTFT

Workstream 7 Workforce & Organisation Development;

Executive Leads: HR Directors

Work stream 4 Service Improvement

Exec Leads: COOs

Strategic Collaboration Board Membership - Chairman: John Rivers; 2 NEDS Burton; 2 NEDS Derby; All Execs from both Trusts, Trust Secretary (BHFT) and Associate Director – Business Development

and Transformation(DTHFT), Programme Director, 2 CCGs, NHSI Rep

Workstream 8 Finance Executive Leads: FDs

Workstream 3b – Shared services dives

Exec Leads: FDs

Workstream 2 Business Case

Exec Lead: Director of Strategy & Partnerships BHFT

(Programme Director)

Project Group – weekly (exec lead from each workstream)

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Figure 5: Significant additions in FBC compared to OBC

Additions to FBC Description

Clinical service areas (delivery and implementation plans to achieve patient benefits)

This OBC outlines plans for priority clinical service areas where there are benefits

associated with collaboration. The FBC will further develop these plans into detailed

operational integration plans as part of the Post Transaction Implementation Plan

(PTIP). The FBC will also set out how and in what timeframe the clinical collaboration

and service sustainability and improvements can be achieved for the benefit of

patients and staff.

Public engagement

During development of the FBC there will be public engagement on the case for

change and the preferred options. Public, staff and stakeholder views will be gathered

in face to face meetings and other forums, to ensure the best possible understanding

of what concerns need to be addressed and where the opportunities lie. Information

gathered will be used to shape the FBC.

Financial Analysis

Financial analyses and information which will be in the FBC include:

Long Term Financial Model (LTFM)

An LTFM will be developed for both Trusts and for the merged Trust which shows in

detail the future finances over the next five years. It will include revenue and

expenditure and detailed assumptions about economic conditions and future

spending scenarios. This will help Boards and regulators understand the financial

position of both Trusts in the long term if no strategic change takes place.

Synergies/ financial benefits

The financial benefits associated with the recommended option in the OBC will be

analysed in greater detail. This will include how the clinical and financial benefits

identified in this document will be delivered, together with an updated analysis of the

associated financial benefits. This will also be compared to the 2018/19 operational

plans of both organisations.

More detailed analysis is required on the timeframe, deliverability and cost

implications of integrating IT systems.

Assets and Liabilities

A high level review of both organisations’ balance sheets will be completed so both

Boards understand the risks and opportunities of the merged organisation.

Capital

Capital requirements associated with the collaboration will be estimated for inclusion

in the FBC.

Governance

Proposals will be drawn up of how the enlarged organisation will be run and governed.

This will include details of the proposed Board for the merged organisation, on day to

day delivery of services, maintaining high standards of quality care, how the enlarged

workforce and operational performance will be managed. This will be achieved

consistently across the new organisation ensuring that patients receive the same level

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of service and care in the new Trust.

Competition and Markets Authority (CMA)

The CMA will formally feed back its analysis of any competition issues that might be

relevant to both organisations merging, and if any action is required by them, this will

be included in the FBC. The implementation plan assumes that this will only require a

phase 1 review. However if a CMA stage 2 review is required this is likely to impact on

the timeline by at least an additional 24 weeks/6 months and have additional cost

implications. NB. CMA stage 2 review costs have not been included in the programme

costs outlined in section 8.5.

External Assurance

External assurance of the financial details contained in the FBC will be provided to both Boards. Assurance will be sought on the assumptions, finances, clinical pathways

and the design of the future organisation. External legal advice will be sought on any arising issues from due diligence. Legal advice will also be sought to ensure the parties have met all the legal requirements for the transaction.

Estates strategy, activity and capacity modelling

Further work will be undertaken in the next phase of work to develop estates’ impacts

for the collaboration opportunities, as will the development of an activity and capacity

model to underpin the clinical service models, including theatres and bed impacts.

Post Transaction Implementation Plan (PTIP)

The detailed PTIP will cover 3 areas:

1. The enlarged organisation describing how the merged Trust will work, including

the management structure, governance arrangements and the proposed

structure of clinical groups.

2. The project management arrangements for integration describing how the

implementation plan will be delivered including the governance systems and

processes which will be put in place to ensure safe ‘Day One’ operation of the

enlarged Trust and the subsequent integration plans. It will also focus on how the

benefits of the transaction will be measured and delivered.

3. The project workstreams and implementation plans will document workstream objectives, milestones, risks and mitigations as well as all activities to be undertaken before and after the transaction.

Conclusions:

Along with the rest of the NHS, both BHFT and DTHFT are experiencing clinical, operational and

financial challenges which are increasing over time as rising patient demand and workforce

issues become more acute. These pressures have impacted on our annual performance against

national quality and operational performance standards. Both Trusts struggled to deliver on

some performance measures in 2015/16, and whilst improvements have been demonstrated in

2016/17 we are facing challenges consistently meeting our performance targets. Both Trusts

have faced significant financial challenge in recent years and had a combined in year financial

deficit of £20.6m (£42.4m without STF) for 2016/17, this included:

o DTHFT deficit of £12.4m (£26.7m without STF); and

o BHFT deficit of £8.2m (£15.7m without STF).

Neither Trust is financially sustainable on its own. Some general services at BHFT are not

21


catchment population to make them secure. We have both considered the options for securing

our future sustainability and believe that a formal strategic collaboration between the two

Trusts is likely to be the best way to address our specific sustainability challenges, and enable us

to continue to provide a full range of services for our local populations.

A SOC was presented to and approved by both Boards in October 2016, the recommendations of

the Boards was to progress to OBC with the scope of work including to:

o Further develop the collaboration proposals to deliver clinical and financial

improvements for our populations and

o Further explore the options of group structure or merger organisational form models as

routes to deliver improvements for our populations.

This OBC aims to recommend to the Boards the form of strategic partnership between BHFT &

DTHFT (group structure or merger) that most improves:

o NHS services provided by both parties for the benefit of populations served

o The financial positions of both Trusts and, therefore, the financial position of the local

health economy

This OBC will support the Boards to determine whether the benefits are acceptable to proceed

with the development of a Full Business Case (FBC) for the preferred organisational form.

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3. Strategic case – the evidence for change

This section sets out the strategic drivers for change including:

The national pressures (provider sector in deficit, and demand rising with hospital performance

impacts at historical worsts across the country) (section 3.1);

The local picture (the £506 million related health funding gap across our 2 Sustainability and

Transformation Plans (STP)) (section 3.2);

Our reliance on our neighbours to deliver sustainable clinical services (section 3.3);

The challenges faced by both our Trusts (section 3.4):

o Financial sustainability (section 3.5)

o Clinical sustainability (section 3.6)

o Better use of available estate to meet demand (section 3.7)

Our vision and approach for the collaboration between BHFT and DTHFT to address these

strategic drivers for change (outlined in section 3.8 as per our vision outlined in the SOC).

3.1 National picture – the pressures

The demands on the NHS continue to rise, with more people attending accident and emergency

(A&E) departments and an aging population leading to longer hospital stays and more admissions,

particularly in winter months, affecting access to and quality of services:

The number of people seen and treated within the 4 hour standard in A&E dropped from levels

between 96-98% during 2006 to 2011 to 86.72%3 by Quarter 3 2016/17.

The number of patients waiting to start elective treatment has been at record highs of between

3.3 million and 3.5 million from March 2016 to December 2016, with providers failing to achieve

the 92% referral to treatment target in the year, with NHSI provider performance at 89.4% as at

Quarter 3 2016/17.4

This rising demand for services with a continued efficiency requirement has resulted in significant

financial challenges across the NHS. At the end of the third quarter of 2016/17 NHS providers

forecast a full-year net provider deficit of £873 million. Whilst improved from 2015/16, the scale of

challenge is still significant indicating ongoing funding pressure in the system.5

In 2014 the Five Year Forward View6 (FYFV) proposed new models of care to support the NHS

developing new ways of working that could address the sustainability challenges it faces including

acute care collaborations and accountable care organisations. The NHS planning guidance 2015/16

introduced STPs organised around 44 geographical footprints to further support local innovation to

address local challenges and the triple aim of closing the three gaps on health and wellbeing, finance

and quality. There is a national expectation that more radical innovation is needed to meet the

challenges facing the NHS.

3 NHSI Quarter 3 2016/17 Performance report

4 NHSI Quarter 3 2016/17 Performance report

5 The Kings Fund, quarterly monitoring report 1 Marc 2017

6 Five Year Forward View – NHSE, Care Quality Commission, Public Health England, Monitor and Trust

Development Agency, October 2014

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The proposals in this OBC are part of BHFT and DTHFT’s considerations of how best to respond to this need for innovation at a local level. By working together BHFT and DTHFT are seeking to meet

these challenges and provide sustainable and better health care to the communities we serve in Derbyshire and Staffordshire.

3.2 Local picture - the funding gap

BHFT is in the Staffordshire STP footprint and DTHFT in the Derbyshire STP footprint, with

populations of 1.1 million and 1.0 million respectively. BHFT is an associate member of the

Derbyshire STP as it is recognised that there are significant patient and service flows across the

South Derbyshire/East Staffordshire border. We also both provide some clinical services to the

population of North West Leicestershire. Reflecting the national picture, both STPs are forecasting a

health and social care financial gap in year five (2020/2021) in the ‘do nothing’ scenario, amounting

to:

Approximately £542 million, of which £286 million is health related for Staffordshire7

Approximately £329 million, of which £220 million is health related for Derbyshire8.

Both STP plans focus on priority areas (see Appendix 5) to avoid future potential cost (due to growth

and inflation) and to remedy underlying deficits faced by organisations. These include high A&E

attendances, increased need for services to support an aging population. Our aging population often

experience multiple long term conditions with consistently high length of stay in hospital and high

readmission rates. There is congruence between the work of the collaboration and both STPs in a

desire to increase provision in the community and provide less care within acute hospital settings.

By collaborating across our acute services BHFT and DTHFT aim to contribute to lower per capita cost for our populations and reduce variation in outcomes for the populations we serve whilst improving our patient’s experience of the services we provide. There is an opportunity to gain

economies of scale, by reducing duplication through collaboration. The scale of the funding gap (£506 million health related) across our two STPs will not be addressed by our organisations

operating in isolation.

3.3 Local picture – partnerships, networks and competitors

We both operate in a region with a large number of other providers which creates both competition

but also a significant opportunity for networking and partnering. Geographically, the two main

hospitals sites operated by DTHFT and BHFT are 11 miles apart, with a number of other acute and

community hospitals nearby (see the map and analysis overleaf).

Developing strategic partnerships to address our sustainability challenges has been a core focus of both our Trusts’ strategies.

7 Source: Staffordshire STP re submission – December 2016

8 Source: Derbyshire STP submission – 21 October 2016

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Figure 6: Providers across Derbyshire, Staffordshire and surrounds

Amongst local providers, we also both have existing partner arrangements to support our clinical

networks:

DTHFT provides a range of

specialist services at BHFT

(11 miles apart) including

oncology, oral and

maxillofacial surgery,

spinal services, imaging

and clinical measurement

Tertiary partnerships with

Nottingham University

Hospitals NHS Trust (NUH)

and (a) DTHFT (16 miles

apart) for complex cancer

services, specialist

paediatric services

(including paediatric

radiology), neurosurgery

and major trauma

(including burns) (b) BHFT

(32 miles apart):

neurosurgery and

neurology

Tertiary partnerships between BHFT and University Hospital North Midlands NHS Trust (UHNM,

33 miles apart) for major trauma, cardiac surgery, neurosurgery, vascular services, Primary

Percutaneous Coronary Intervention (PPCI) services for hospital in-patients

Joint working between DTHFT and University Hospitals of Leicester (UHL) (37 miles apart) for

cardiac surgery and some cardiology procedures

Joint consultant appointments, e.g. vascular, between DTHFT and Chesterfield Royal Hospital

NHS Foundation Trust (CRHFT, 32 miles apart), as well as opportunities to collaborate on

pathology services

DTHFT works with Derbyshire Community Health Services NHS Foundation Trust which provides

community services including beds and community teams (supporting discharge). In addition to

this, it works in partnership to provide a range of planned care pathways including outpatients

and surgery from the wider South Derbyshire Community hospitals (e.g. Ilkeston)

BHFT is working with Virgin Care to provide a new delivery model to better manage demand in

adult unplanned care and long term conditions

BHFT’s STRIDE partnership with Health Innovation Partners Ltd, a strategic efficiency and

infrastructure partner to develop the estate.

Out of county provision will be taken into account, when mapping new pathways in recognition of patient choice.

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3.4 Challenges faced by both of our Trusts – overview

We both face clinical and financial sustainability challenges and both our organisations recognise an

increasing need to develop partnerships to address these. Meanwhile other organisations in

neighbouring areas are also developing partnerships and there is a risk that services, at both DTHFT

and BHFT might be lost as others seek to expand their influence and secure economies of scale (see

list of neighbouring organisations in section 3.2.

There are three strategic drivers for change described in more detail in this chapter:

1. Clinical sustainability – some services are not currently sustainable or are likely to become

unsustainable in the future without collaboration: due to issues such as sub specialisation and

workforce shortages and the increasing requirement for larger catchment areas for specialist

services (outlined further in section 3.5).

2. Financial sustainability – both organisations have deficits and are financially unsustainable as

they are currently organised (outlined further in section 3.6)

3. Better use of the available estate to meet demand – demand for services is increasing regionally

and locally, and the current configuration of clinical capacity is not matched to meet this

demand (outlined further in section 3.7). More efficient, effective and responsive use of our

buildings, particularly our community hospitals, will help us to meet the identified increasing

clinical demand.

3.5 Clinical sustainability

Quality overview

Both of our Trusts are aspiring to improve our current CQC ratings:

DTHFT was inspected in December 2014, and was rated “Good”. Under the new CQC inspection

regime, a re-inspection took place in August 2016 of selected services and quality domains. This

was a limited inspection that looked at the “safe” domain in medical care and maternity and

gynaecology, and the effective domain of end of life care. The CQC found that compliance

actions from 2014 had been met.

BHFT currently has an overall rating of ‘requires improvement’, which was assigned in October

2015. In July 2013 BHFT was one of 11 Trusts placed in special measures by Sir Bruce Keogh

following a review into hospitals with higher than expected mortality rates. BHFT was removed

from special measures following CQC inspection in July 2015 and now has a robust process in

place to review mortality and morbidity information, in line with nationally recognised methods

and indicators.

Trust level SHMI and HSMR are both within the expected range for both Trusts as of the latest

publication date. Appendix 6 provides a summary of historical mortality rate performance for both

Trusts.

Clinical sustainability overview

26

In order to understand the clinical sustainability risks we each analysed our current risks by service

line, see Appendix 7. Both our Trusts and our wider health economies face clinical sustainability

challenges, specifically:

For DTHFT - the main risk to clinical sustainability relates to its highly specialised or ‘tertiary

services’ such as cancer surgery. For these services there are nationally recommended minimum

population sizes to ensure sufficient volume of activity and case numbers per surgeon. DTHFT’s

specialist services have good clinical outcomes but the catchment population served is not

sufficiently large enough. Unless the Trust is able to increase its catchment population and case

numbers per surgeon some of these tertiary specialty services are at risk from specialist

commissioners divesting services from DTHFT.

For BHFT - the risk relates to a small catchment population. Standard secondary care services

are threatened due to low volume of clinical activity and furthermore difficulties recruiting to

and maintaining a stable multi-professional workforce. As services become increasingly sub-

specialised the low volume and clinical quality issues become even more pressing.”9

Both Trusts - face common challenges across workforce in medical, nursing, theatre staffing

and recruitment of some key allied health care professionals. Services that are most challenged

across both Trusts are A&E, acute medicine, diagnostics & imaging, and general surgery

(including theatre nursing staff).10 These are areas that face a national workforce shortage.

There are a number of other service lines where we both face challenges recruiting to. For

analysis of vacancies by service line at BHFT and DTHFT see Appendix 8a and 8b respectively.

Both Trusts - face challenges in consistently meeting operational targets in A&E (4 hour target),

see Appendix 9, and RTT in specific specialties such as general surgery and orthopaedics, see

Appendix 10 for RTT performance by specialty.

Both Trusts face challenges meeting demand both now and in the future, particularly in care of

the elderly, A&E, endoscopy, orthopaedics and radiology.11

The section that follows provides further detail on the key challenge areas for both Trusts, by

theme including:

Workforce challenges

Operational challenges against national targets and quality standards

Challenges in providing local access to specialist services

Challenges in smaller services

Demand challenges

Estates and flow challenges

Out of hours

9 Page 35 Strengthening financial performance and accountability in 2016/17 – 21 July 2016, NHS England and

NHS Improvement 10

See Appendix 8a and 8b – Workforce challenges and vacancies BHFT and DTHFT 11

Based on Trust narrative

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Workforce challenges

The workforce challenges include:

Continuous recruitment in front line services;

Retention difficulties in front line service;

Greater reliance on locum and agency staff; and

Increased staff costs.

There is a particular challenge for the East Midlands deanery, which supplies DTHFT with trainee doctors. For this deanery the number of training posts for doctors is amongst the lowest nationally, excluding areas adjacent to London which have historic pooled arrangements with London (see Appendix 11).

BHFT has historically experienced difficulty in recruiting across all staff groups, which may be due to

its size and location, as a small DGH situated in the middle of 4 large teaching hospitals. The Keogh

review and subsequent CQC rating of ‘requires improvement’ has also impacted on recruitment,

however the Trust’s on-going focus on its improvement journey has improved this more recently.

Both Trusts have recently worked to stabilise our A&E workforce. By the end of July 2017 DTHFT will

be up to their full establishment of 16.68 WTE consultants12. DTHFT has implemented and developed

alternative workforce solutions, including significant investment in Advanced Clinical Practitioner

roles, Certificate for Eligibility of Specialist Registration (CESR) posts, Junior Clinical Fellows and

Senior Clinical Fellow posts, to fill medical training post gaps. BHFT has also developed a more

resilient A&E workforce, helping to sustain this service. BHFT has also improved its A&E substantive

workforce by 2.0 WTE and now has 7.0 substantive consultants. BHFT is now fully staffed for middle

grade doctors with 10 in post. Vacancies for nursing staff however remain in both A&Es.

Both of our wider acute medicine services (ambulatory care, short stay and assessment units) have

gaps in our consultant workforce. BHFT is currently running its acute medicine service with 4.0 WTE

consultants (1 WTE substantive post and 3 locum posts) compared with a required establishment of

6.0, however staff turnover is high in this area. From 1st of May 2017 DTHFT has had a full

establishment of consultants (11.51 WTE)13, the majority of specialist medicine consultants also

deliver at least 1 PA into MAU/ACC. To maintain safe services, the gaps were filled by a combination

of long term and short term locum shifts. Medical vacancies are seen across both of our Trusts in

elderly medicine and respiratory medicine. Nursing gaps also exist in medicine and both of our

Trusts run ongoing recruitment processes to address these gaps.

All surgical clinical deep dive workshops raised the challenge of being unable to recruit theatre staff.

For example, DTHFT has challenges in delivering sufficient orthopaedic activity to meet national

waiting time standards and staffing limitations make it difficult to deliver extra theatre lists. Both our

Trusts are pursuing international recruitment for nursing and theatre staff in order to mitigate this.

See Appendix 8a and 8b respectively, for analysis of vacancies by service line at BHFT and DTHFT.

Operational challenges against national targets and quality standards

12

Source: Trust provided 22/03/17 13

Source: Trust provided 27/09/2016

28

Rising demand, resource constraints and changes in other parts of the health and care economy

make it increasingly difficult for hospitals to maintain delivery of national standards. A mismatch

between demand, capacity and workforce often creates substantial operational challenges and can

lead to long term service challenges.

We both face challenges in consistently achieving a number of national targets and quality standards

including:

Stroke standards

Access to diagnostics

Cancer waiting times (62 day)

18 weeks referral to treatment in some specialties.

Maintaining ‘patient flow’ that is, the ability to admit, treat and discharge in a timely way.

In stroke, performance is measured on a scale from A (best) to E (worst). Currently BHFT is classified

as a D and DTHFT as a C (see Appendix 12), illustrating that we both have areas where improvement

is required. In this regard, at DTHFT 7 of the 10 clinical standards are currently achieved, the three

remaining relate to nurse establishment, access to psychology services and access to therapists at

weekends. We anticipate that we could realise the benefits of shared best practice on the individual

criteria reported through the Sentinel Stroke National Audit Programme (SSNAP). Developing a

single integrated stroke service would provide opportunities to improve patient outcomes and

performance against national standards. Section 4 provides further detail on opportunities to

improve stroke services through collaboration.

To alleviate operational and quality issues in radiology, both teams are using the NHSI capacity and

demand modelling tool to improve performance. However, the BHFT imaging department cannot

meet the Imaging Services Accreditation Scheme (ISAS accreditation). In particular, quality standards

cannot be met when a consultant is on annual or sick leave because cancer multi-disciplinary team

(MDT) cover cannot be provided.

DHTFT's A&E and acute medicine services face flow challenges.14 These need to be addressed in

order to meet the pressure of increasing demand.

Demand challenges

Endoscopy is a diagnostic service which is predicting a 44% increase in activity nationally over the

next 5 years (from 2015).15 This requires more provision and standardisation, including at the

community hospital sites, to achieve Joint Advisory Group (JAG) accreditation and to create

additional capacity.16 In addition, local circumstances are further contributing to demand growth for

endoscopy services as DCHS recently suspended the endoscopy service at their Ilkeston Hospital site.

14 See Appendix 9 Operational targets 15

Sourced from ‘Scoping the future: An evaluation of endoscopy capacity across the NHS in England, carried out by the Heath Services Management Centre at the University of Birmingham and Cancer research UK.

29

Within orthopaedics, there are challenges meeting elective demand, including impacts from winter

pressures. This causes deterioration in waiting times and financial impact (e.g. DTHFT outsource or

incur Waiting List initiative (WLI) payments to meet their elective demand).

Challenges in providing local access to specialist services

The relationship between increased volume of procedures and the outcome of treatment is an area

of national focus. The Royal Colleges, Improving Outcomes Guidance, Clinical Networks and NHS

national guidelines are increasingly relating patient outcomes to population size and emphasise the

importance of sufficient clinical volume. National consolidation of some services has already

occurred, including the introduction of major trauma centres in 2012; this significantly improved

outcomes for patients with serious injuries. The vascular service review also concentrated most

procedures into regional vascular centres.

DTHFT’s upper GI cancer surgery requires a minimum catchment population of one million and a set

number of operations per consultant to meet service specifications. The collaboration would get

DTHFT closer to the service specification, but cannot guarantee the service in the long term as this

depends on commissioner intention.

DHTFT will benefit from a larger commissioner population for specialised services which will enable

it to provide future proofing for tertiary services such as upper GI cancer surgery and cardiology

Future stroke service would be required to support between 750-1000 strokes per annum (NHSE

guidance). BHFT sees circa 450 confirmed strokes per annum (due to size of population served) and

DTHFT sees ~900-1000. Mortality rates at BHFT are higher than those at DTHFT. In addition to the

above risks, BHFT has issues with its limited early supported stroke discharge capacity, service

sustainability (no full time stroke consultants), lack of ability to deliver 24 hour consultant

administered thrombolysis and 7 day transient ischaemic attack (TIA) service.

Thrombectomy national guidance which is clinical best practice will require acute access to specialist

service for thrombectomy from a tertiary provider envisaged to be NUHT.

Challenges in smaller services

In BHFT, there are a number of services which employ relatively small numbers of consultants and

therefore find it difficult to support sub-specialisation and to maintain 24/7 emergency cover. Some

services operate single-handedly or in very small teams, with limited cross cover and peer support.

30

Small departments mean there is little opportunity to have a specialist interest and limited

opportunities for personal development adversely impact on staff recruitment and retention. Acute

medicine and general surgery also have out of hour cover difficulties e.g. with providing a robust

emergency rota to safely manage GI bleeds at night.

Sub specialisation within general services is not an issue at DTHFT because the teams are sufficiently

large to support the necessary range of sub-specialty interests and provide robust and favourable

on-call arrangements. However, there are a few very specialist areas at DTHFT that are particularly

challenging. For example, there is a single handed service in paediatric ophthalmology which is a

highly specialised service and currently resourcing is insufficient to meet demand.

Estate and flow challenges

At BHFT, radiology, urology, A&E and acute medicine all face challenges with estate and flow.

Radiology has insufficient space for the increased activity it is experiencing whilst urology is based in

a standalone Victorian building. The layout of the A&E department does not support the ideal flow

and volume of patients through the pathway. Surgical specialties are facing estate challenges that

will require them to either work with another hospital to take advantage of any spare capacity or

build a new theatre suite.

At DTHFT the acute medicine ambulatory care service could see and treat more patients on an

ambulatory pathway rather than an emergency admission if the estate allowed expansion of this

service’s footprint. A significant issue for surgical specialties is having sufficient theatre capacity to

match their demand. This is a particular problem for paediatrics, general surgery and trauma and

orthopaedics. If the redesign of the emergency department, GP co-location and enhanced

ambulatory service are realised, then the current outpatient facility used by diabetes and

endocrinology and rheumatology will need to be relocated. Endoscopy also faces capacity

constraints in its number of rooms and decontamination facilities as well as ongoing equipment

replacement.

Out of Hours

Under a merged structure there are opportunities to improve the provision of out of hours support.

Currently on-call rotas are duplicated in a number of the main specialties across both Trusts and

encounter issues around the high cost due to the number of staff, intensity of the on call and the

amount of additional cover required in circumstances of sickness or absence. Some of these on call

services can be delivered more effectively in a merged trust through single teams and the issues

referenced above can be managed more effectively.

Most of the deep dive specialties described a joint workforce in their future clinical models and we

anticipate that cross cover, including on call in some specialties, will be built into the operational and

clinical delivery of the future service. We are exploring a model of dual-site consultant on-call cover;

this would reduce on call expenditure by about a 20% and increase the clinical safety of some

smaller services that will continue to be delivered from the BHFT site (e.g. out of hours GI bleeds).

3.6 Financial sustainability

Historical and current performance

31

We are both currently financially unsustainable with a reported combined deficit of £45.5m in

2015/16 (£16.2m at BHFT and £29.3m at DTHFT)17. In 2016/17, on the same basis, the combined

outturn position was a £41.0m deficit excluding STF and £20.6 combined deficit when including STF

and impairments, see Figure 7 below.

In 17/18 the combined deficit is anticipated to be £51.9m (without STF).

Figure 7: Trust deficits including and excluding revaluations and impairments and STFs

Notes to table above:

1BHFT is assuming receipt of £5.4m STF recurrently from 2017/18 to deliver an in year deficit of

£9.7m. 2DTHFT has assumed zero STF funding from 2017/18 and beyond due to not accepting its control

total for 2017/18, however DTHFT believe resolution of the structural deficit would enable the

acceptance of the control total and a receipt of £12.7m in STF funding recurrently.

17

Deficits exclude revaluations and impairments. The combined deficits including revaluations and impairments in 2015/16 were £33.5m (£17.3m at BHFT and £16.2m at DTHFT respectively). 18

Source: 15/16 Trust accounts 19

Source: 16/17 Trust accounts

Figures in £ million Forecast19

Trust 2014/15 2015/16 2016/17 2017/18

2014/15

to

2015/16

2015/16

to

2016/17

DTHFT -21.2 -29.3 -25.4 -36.8 -8.1 3.9

BHFT -10.4 -16.2 -15.6 -15.1 -5.8 0.6

Total -31.6 -45.5 -41.0 -51.9 -13.9 4.5

DTHFT 0.0 0.0 14.3 0 0.0 14.3

BHFT 0.0 0.0 7.5 5.4 0.0 7.5

Total 0.0 0.0 21.8 5.4 0.0 21.8

DTHFT -59.1 -16.2 -12.4 -36.8 42.9 3.8

BHFT -10.6 -17.2 -8.2 -9.7 -6.6 9.0

Total -69.7 -33.4 -20.6 -46.5 36.3 12.8

Trust deficit including

revaluations, impairments and

STF

Actual18 Variance

Trust deficit excluding

revaluations, impairments and

STFs

STF not included in the above

position

32

Do minimum scenario as stand-alone organisations

Our combined annual deficits are forecast to £37.5 million at 2021/22, in a ‘do minimum’ scenario in

which we both continue to operate independently. The key assumptions in the ‘do minimum’ and

‘do nothing’ scenario are outlined in Figure 8 below.

Figure 8: Assumptions in ‘do nothing’ versus ‘do minimum’ scenario

Scenario Assumptions and financial impact

Do

nothing

Activity as per ‘do minimum’

Neither Trust achieves CIP - Impact of not achieving CIP has been forecast

at £103.8m, this would result in a combined deficit of £141.3 m by 2021/22

Do

minimum

Both Trusts achieve our baseline CIP ranging from 4.7% to 1.7% over the

period 2017/18 to 2021/22 (as a proportion of operational expenditure),

this would result in a combined deficit of £37.5 m by 2021/22

Activity growth of 2.5% to 2.6% over the period 2017/18 to 2021/22 with

zero per cent contribution margin (i.e. additional income is forecast to be

off-set by additional cost)

Irrespective of any collaboration plans between BHFT and DTHFT, a number

of key service changes will be required to deliver safe sustainable services,

these are:

o Reconfiguration of stroke service at BHFT to another provider (if no

collaboration between the Trusts happens)

o Reconfiguration of neurology service at BHFT to another provider

o Investment for 7 day services for BHFT and DTHFT

o Increase in Endoscopy capacity across both Trusts, and achievement of

JAG accreditation in Tamworth and Ilkeston

o Integration of Radiology service across both Trusts to achieve ISAS

accreditation

33

Figure 9 below shows our forecast annual deficit from 2017/18 to 2021/22 under the ‘do nothing’

and ‘do minimum’. Both of these are prior to any merger benefits.

Figure 9: Combined deficit under ‘do nothing’ and ‘do minimum’ scenarios from 2016/17 to 2021/22

Source: Trusts Master consolidation model 30/03/2017 and finance estimates 25/05/17

Key drivers of our deficits

In 2015, a review was undertaken on DTHFT’s 2015/16 normalised deficit, this indicated the main

aspects to its deficit were structural drivers of £18.7m and operational drivers of £16.7 m. Of the

structural drivers £15.1m related to PFI and £3.6m related to costs associated with low allocation of

medical trainees.18

In 2016/17, the deficit at DTHFT was partly due to a structural deficit of ~£20m, largely driven by the

PFI contract (£15m) and lower than national allocation of medical trainees (£5m).19

PFI contract - Inflation on services provided under the contract and the capital provided is

charged at a higher rate than the equivalent NHS inflation and Public Dividend Capital (PDC)

rates respectively. Additionally, interest repayments are charged at a higher rate than the

current HM Treasury funding rate. This is forecast to contribute approximately £15m to the

deficit in 2016/17 and ongoing.

Lower allocation of medical trainees - due to a shortage of trainees in the region, leading to

additional agency expenditure to fill posts, a strategic driver forecast to contribute

(approximately £5.0m to the deficit in 2016/17).

18

Source: Monitor and DTHFT sustainability report 2015 19

Source: DTHFT finance team narrative 23/03/17

34

Until a review is taken on central funding these will not be covered by current payment mechanisms.

DTHFT also has other operational factors driving its deficit including contract income not factored

into our commissioner contract; these contributed a further £9.0m to the deficit in 2015/16.

The deficit at BHFT is driven by a number of strategic and operational factors, including:

Investment in staff in response to quality concerns raised by Keogh and the CQC between 2013

and 2016

Recruitment challenges given the proximity of other large providers and the challenges of sub-

specialisation

A large, sprawling estate, including a treatment centre on the main site and two community

hospitals

Lower acuity case mix than peers and therefore less income without a corresponding lower cost

base due to a number of factors including longer patient ‘length of stay’.

Collectively, these factors were drivers of the deficit of £15.6m (without STF) in 2016/17 at BHFT.

3.7 Other drivers for change identified e.g. estates/community site utilisation analysis, risks in

wider health economy

DTHFT estate is made up of a new PFI acute hospital and a community hospital site based in Derby

city centre. BHFT sites consist of one acute hospital in Burton Upon Trent and two community

hospitals situated in Tamworth and Lichfield.

DTHFT PFI hospital opened in 2010. It is recognised that this is a high quality estate that comes with

a high operational cost. The hard and soft FM contracts are 70% contracted out with the PFI contract

which means it is difficult to reduce the occupancy costs. As at 2014/15 these costs were £53.0m

(representing 11% of the Trust turnover). This is the fourth highest PFI as % of PFI cost to Total Trust

revenue (versus the benchmark group of Foundation Trusts nationally), see the figure below. The

efficient use of the estate and facilities must therefore be a core aim along with maintaining and

improving the high standards already achieved.

Figure 10: Analysis of Foundation Trust PFIs as per Annual Plan submissions 2014/15

Figures in £ million 2014/15 Total cost of

PFI

2014/15 Total Trust

revenue

2014/15 PFI cost as a % of Total

Trust revenue

Peterborough and Stamford NHS FT 41.7 250.9 16.6%

Sherwood Forest Hospitals NHS FT 43.1 264.9 16.3%

The Dudley Group NHS FT 43.3 326.3 13.3%

Derby Teaching Hospitals NHS FT 53.0 478.4 11.0%

Source: NHSI analysis of 2014 Provider Trust Annual reporting plan submissions

The overriding aim for DTHFT relating to the PFI building is to ensure that it is used to its maximum

capacity and the need for any new build is avoided. A significant part of the DTHFT hospital is used

for non-patient related activity e.g. support functions which are generally non-income generating.

Through the partnership, there is the possibility that some of this 23,165 m2 could be converted to

income generating patient areas. This is also highlighted by benchmarking of revenue per m2

showing £269/m2 for DTHFT versus the top third of NHS Trusts at £327/m2, see Appendix 13.

35

A large proportion of the BHFT estate (37%), predominantly at the Queens Hospital site is not being

used for patient activities. This suggests that there is scope to rationalise space across all three of its

hospital sites making better use of the newer buildings such as the treatment centre. BHFT has a

mixture of ageing and newer estate, the community hospital in Tamworth is a small hospital site

with backlog maintenance of £1m, significantly higher than the England average.

3.8 Other partnerships (previously considered options)

To address our sustainability concerns, other partnership options were considered by each of our

Trusts, as outlined in the SOC including:

1. Vertical integration with community and primary care providers to support changes to whole

clinical pathways to, for example, manage acute demand – which is the primary focus of the two

STPs.

2. Horizontal integration through an acute alliance to address specific challenges to acute services

provided by each Trust.

Along with the potential BHFT and DTHFT collaboration, this highlighted seven potential partners for

collaboration (four acute/tertiary and three community/integrated care providers), these include

Nottingham University Hospitals NHS Trust (NUHT); Sherwood Forest Hospitals NHS FT (SFHFT);

Chesterfield Royal Hospital NHS FT (CRHFT); University Hospitals of the North Midlands NHS Trust

(UHNM); Derbyshire Community Health Services NHS Trust (DCHS); Virgin Care; and Staffordshire

and Stoke on Trent Partnership Trust (SSoTP).

The limitations for more extensive collaboration (than currently exists) with these organisations are

outlined in Appendix 14.

Key factors that have led us to work through a potential BHFT and DTHFT collaboration further are:

The geographical proximity of DTHFT and BHFT, which lie 11 miles apart and are connected by

good transport links

Our existing joint working on, in particular, key specialist services

The ‘collaboration proof of concept’ (CPoC), submitted to Monitor20 in December 2015, which

reaffirmed the potential clinical and financial opportunities from joint working, including

integrated teams, redesigned service offerings with new clinical pathways, better career

opportunities for clinical and other staff, and efficiencies from shared service support functions

Preliminary work and discussions with Monitor21 identified potential opportunities from closer

collaboration, including opportunities to:

o Redesign clinical services to improve patient care and to make them more sustainable

o Reduce costs through sharing support services and avoiding duplication

o Provide opportunities for career development, and retain the talent of our staff

20

Monitor became known as NHS Improvement (NHSI) from 1st

of April 2016 21

Ibid

36

3.9 Our vision and aspiration for the collaboration

Emerging joint clinical vision and objectives

The current strategic visions for each organisation have much in common and are complementary,

with a common purpose of delivering outstanding care for all, that is, our patients, our people, our

population and our partners (irrespective of the organisational form of our partnership). Our

strategic directions have substantial degrees of commonality, which we are working toward further

aligning (alongside continuing our work within both STP footprints to deliver local health services).

The final vision and strategy for the preferred collaboration form will be a matter for the Boards and

governors to finalise, the combined collaboration draft vision, values and objectives in Figure 11

below is a starting point for discussion.

The recommended organisational form should support delivery of this emerging vision and

objectives.

37

Figure 11: Proposed joint collaboration vision, values and objectives

3.10 Our emerging clinical strategy for collaboration benefits

Patients first

•Focussing pathways clearly to deliver best outcomes for patients

•Delivering care closer to home

•Patient centred care

•Resilient and sustainable local specialist services

Right care, first time

•Better clinical outcomes and outstanding care

•Seamless pathways

•Eliminate unwanted variation

•Equity of access for the combined population

Invest our resources

wisely

•Exceeding the model hospital

•Best use of resources, best use of estate

•Exemplar of Lord Carter review on efficiency

Develop our people

•Truly engaged workforce, highly skilled, motivated

•Attractive place to work

•Closer integrated links with the university/education sector that feeds our organisations with emerging talent

Ensure value through partners

•Choosing the right partners for long term strategic benefit

•Working in partnership for the benefit of patients beyond the physical boundaries of our organisations

•Being the provider and partner of choice across our combined population

Objectives

Values

Vision

“Together, we can deliver outstanding care for all”

Our patients Our people

Our population Our partners

“We CARE with PRIDE”

38

Given the proximity between our two main hospital sites we share a large proportion of our

combined population, such that there are opportunities to deliver better outcomes and benefits for

patients via creating one clinical strategy, alongside working within both STP footprints to deliver

local health services. Figure 12 below outlines our emerging clinical strategy, which has been

developed with the involvement of front-line clinical staff, non-clinical staff, as well as the senior

leadership teams from both organisations.

Figure 12: Emerging clinical strategy for collaboration

Reflect the national move towards integrated ‘place based’ care

We are both working with our STP partners to develop community care strategies which help

support the planned and unplanned care element of better running our acute hospitals, through

developing strategies to mitigate future demand increases (i.e. stopping people coming through the

“front door” and/or reducing inappropriate referrals where patients may be better served in the

community by distributive models of care).

To further support this, BHFT is partnering with Virgin Care, for East Staffordshire, with discussions

underway to develop this partnership more formally. Virgin Care’s clinical model includes a clinical

care coordination hub to help care for patients outside of hospital and an IT solution which

integrates GP records with hospital records to provide a longitudinal view of patient information to

better manage care. This work is also supporting the implementation of the Keogh review

recommendations on developing urgent and emergency care networks.

A model for integrated community hubs as part of delivering a ‘place based’ model of community

and care services is also emerging in Derbyshire and there is a significant opportunity for shared

39

learnings and the development of a consistent integrated model across the populations of

Derbyshire and East Staffordshire, leveraging the work undertaken to date by BHFT and in both

Staffordshire and Derbyshire STPs.

DTHFT also works in partnership with DCHS in the provision of integrated care. DCHS operate a

virtual ward system which facilitates earlier discharge by supporting the management of patients in

care closer to/in their own home. Together with the community support teams (established in

2014/15) which seek to manage risk stratified patients in the community (thereby avoiding

admissions to hospital) both of our Trusts continue to improve pathways in and out of the hospital

setting. Similarly these learnings could be shared through to East Staffordshire.

We also envisage that our community hospitals will be utilised further where this supports providing

care closer to home, including the:

Lichfield and Tamworth sites – where we can explore increased usage through GP

partnership, ‘place based’ care and the introduction of specialist services e.g. outpatients,

from DTHFT. Access to diagnostics including X-rays, Diagnostics, and Community Hub on

Tamworth site.

London Road Community Hospital (LRCH) site – where we can explore the development of

specialist rehabilitation services for our combined population and beyond, and also use it as

a focus for the creation of a ‘community hub’ to support the development of place based

care as part of the Derbyshire STP.

Conclusions:

Along with the rest of the NHS, both BHFT and DTHFT are experiencing clinical, operational and

financial challenges. These pressures impact on our annual performance against national

quality and operational performance standards. Both Trusts struggled to deliver on some

performance measures in 2015/16, and whilst improvements were demonstrated in 2016/17

we are facing challenges consistently meeting our performance targets. We had a combined in

year financial deficit of £41.0m (excluding STF) in 2016/17.

Neither Trust is financially sustainable on its own. Some general services at BHFT are not


catchment population to make them secure.

Our key challenges include sufficient numbers of clinical staff (e.g. in acute medicine);

sustainability of smaller specialties at BHFT; insufficient catchment population at DTHFT for

some specialist services; consistent achievement of some operational targets; and ensuring the

best use of estate.

We have both considered the options for securing our future sustainability and have decided to

explore either group structure or merger against the status quo/do minimum scenario.

Our strategic directions have substantial degrees of commonality, which we are working

toward further aligning (alongside continuing our work within both STP footprints to deliver

40

local health services). We have outlined our aspirations for the vision, values and objectives of

any proposed collaboration and the emerging clinical strategy.

The final vision and strategy for the preferred collaboration form will be a matter for the Boards and governors to finalise, the combined collaboration draft vision, values and objectives.

The recommended organisational form should support delivery of this emerging vision and objectives.

41

4. Economics case – intended benefits

This section describes our intended benefits from collaboration providing information to consider

which organisation form option may best support us to deliver these benefits, including:

Clinical and patient benefits (section 4.1)

Enablers and risks to delivery for clinical benefits (section 4.2)

Shared services benefits (section 4.3)

Staff benefits (section 4.4)

Finance benefits (section 4.5)

Substantial work has been undertaken on developing the clinical and patient benefits case as this is

felt to provide the greatest gain for the combined population served by the Trusts; the weighting

towards this set of benefits is reflected in the following narrative.

4.1 Clinical and patient benefits

The clinical and patient benefits outlined in this section are based on deep dives conducted into 11

priority clinical areas during the OBC stage, as described in Appendix 3. These specialties have

articulated specific benefits associated with closer partnership and single service delivery models.

The key benefits identified include improved service sustainability, workforce resilience, better

clinical outcomes and stronger service reputation. We expect that many of the benefits identified

within the deep dive specialties would also arise in implementing collaborative models across the

other specialties as well.

Staff from both Trusts have invested significant time to participate in the deep dive workshops and

develop the joint clinical models. At OBC stage, discussions with front line staff have been essential

as an organic driver of change and this will remain important at the FBC phase. At the FBC phase,

further detailed work at service line level will also need to be undertaken to define the clinical and

patient benefits of the preferred organisational form option.

A range of engagement and briefing activities have already been undertaken and these will be built

upon as we go forward. These have included interactive workshops for staff and the general public

with Trust Executives, and regular question and answer briefings for Governors.

A Patient Reference Group has also been convened, co-chaired by the two Chief Nurses, with

significant input from both Medical Directors, membership from both Councils of Governors and

supported by the local HealthWatch leads for Derbyshire, Derby and Staffordshire. A Staff Reference

Group also commenced in March 2017, which seeks to involve staff at all levels from both Trusts in

the programme of change.

Further detailed work relating to impact on patients and development of patient pathways will be

undertaken with wide stakeholder engagement (patients and staff) incorporating feedback from

patient / stakeholder engagement exercises.

Our vision for the collaboration includes improving the CQC rating at DTHFT and BHFT to

outstanding, consistently delivering outstanding care to our combined populations. A core

42

component of our vision is related to equitable clinical outcomes and improving consistency in our

patient offer. Through collaboration, we expect to deliver benefits that address our clinical

sustainability issues whilst also delivering the partnership objectives, clinical vision and clinical

strategy.

These benefits are closely related to the following seven clinical collaboration themes determined

during the SOC phase of work, outlined in the figure overleaf.

43

Figure 13: Clinical view of emerging themes of opportunities and some illustrative examples

Theme of

opportunity

Expected benefits Illustrative examples

1.Share and standardise processes

• Improve quality by reducing unwarranted variation

• Shared learnings and pathway redesign opportunities

• Multi-disciplinary support

• Single clinical governance framework

• Combined Mortality and Morbidity meetings and Audit meetings

2.Share workforce (current and future) and develop workforce enablers

• Stabilise short term workforce challenges • Sustain a long term workforce (through

shared recruitment, development and training)

• Create larger pool of consultants • Availability of on call/ out of hours cover • Ability to meet clinical input 24/7

• Advanced Clinical Practitioner development programme

• Shared rotas/appointments • Unplanned services (A&E;

General and acute medicine)

3.Develop a sustainable surgical model

• Maximise use of estates • Manage elective demand • Increase bed utilisation • Ensure timely care is delivered (reduce

service areas with high waiting times) • Opportunity for efficiency gains

• Orthopaedics • Ophthalmology • Urology • Ear, Nose and Throat • General surgery • Gynaecology • Oral and Maxillofacial • Plastics • Breast surgery • Lower GI; Upper GI • Vascular

4A.Develop best in class medical and day case facilities

• Avoid duplication • Manage demand and ensure timely care

• Endoscopy • Dermatology

4B. Develop best in class investigations facilities

• Avoid duplication • Improve quality – screening and symptoms

pathway

• Diagnostics and imaging

5.Address national quality issues whilst ensuring patients can access local tertiary services

• Stroke national audit programme compliance

• Scale / catchment / quality

• Stroke • Cardiology • Neurology

6A.Repatriating work

• Address clinical sustainability challenges via developing “critical mass” over a larger population

• Improve outcomes

• Breast screening

6B. Delivering services across one integrated team

• Avoid duplication • Improve outcomes • Scale / catchment

• Rheumatology • Respiratory • Nephrology

7.Deliver high quality cancer services locally to the population

• Quality governance • Patient centered approach • Close to home / Single IT / cross site

working • Address clinical sustainability challenges –

e.g. workforce • Improve outcomes • Large collective patient population

• Oncology • Haematology • Palliative care • Lymphodema

44

Each of the 7 themes have been explored further using examples primarily from the 11 deep dive

outputs. The emerging proposed service developments from these deep dive outputs are outlined in

the sub-sections below under each theme and are outlined on the following pages under the

sections outlined below:

The key risks to delivery and required enablers are common across proposals and are outlined in

section 4.2.

4.1.1.Share and standardise processes

•E.g. Common clinical governance framework

•E.g. Joint mortality and morbidity meetings; sharing learnings

4.1.2. Share workforce (current and future) and develop workforce enablers

•E.g. Shared education and training programmes

•E.g. A&E resilience initiatives

•E.g. Acute medicine resilience initiatives

4.1.3. Develop a sustainable surgical model

•E.g. Single orthopaedic service across sites

4.1.4. Best in class facilities: Develop best in class medical and day case facilities

•E.g. Single endoscopy service across sites

4.1.5. Develop best in class investigations facilities

•E.g. Single radiology and imaging service

4.1.6. Address national quality issues whilst ensuring patients can access local tertiary services

•E.g. Stroke service

•E.g. Single cardiology service

4.1.7. Delivering services across one integrated team

•E.g. Single breast surgery and screening service

4.1.8. Deliver high quality cancer services locally to the population

•E.g. Single oncology service

45

4.1.1 Share and standardise processes to enhance a quality improvement culture for our

collaboration:

Illustrative example: Common clinical governance framework

Discussions are underway between us to extend DTHFT’s clinical governance framework to BHFT.

This framework is also being incorporated into the Derbyshire STP submission as well as across the

broader Staffordshire STP, with the aim of creating a common clinical governance approach to

support the quality strategy at divisional and service level within our Trusts, and across the local STP

footprints (see Appendix 15). Benefits of a single clinical governance framework include enabling the

development of common protocols for quality governance, enabling common information sharing

between teams, and enhancing the quality culture, such that the partnership is focused on

continuous quality improvement.

Illustrative example: Shared Audit meetings and Mortality and Morbidity meetings

Paediatric teams are having joint meetings where they are sharing information and areas of good

practice and planning for joint audit meetings in the near future. Other service areas also indicated

they would be keen to share learnings via exploring joint audit meetings.

Separately there is a national driver to improve the effectiveness of mortality reviews. The Secretary

of State indicated that from March 31 2017 the Boards of all NHS Trusts and Foundation Trusts will

be required to collect and report to NHS Improvement a range of specified information, to be

published quarterly (this requirement will be confirmed in new regulations), on deaths that were

potentially avoidable and serious incidents and consider what lessons need to be learned on a

regular basis. Alongside that data, trusts must publish evidence of learning and action that is

happening as a consequence of that information.

By working together and adopting similar processes to meet these requirements, this would support

a culture of continuous learning and improvement of patient safety, and could also ensure

consistency in investigations - supporting staff, patients and families in the process.

4.1.2 Share our achievements on workforce to strengthen the position of both BHFT and DTHFT:

Illustrative example: Shared training and education programmes to support development

opportunities and fill workforce shortages

BHFT is one of the best performing Trusts in the country for junior doctor foundation training22.

DTHFT created innovative doctor training posts such as the Certificate for Eligibility of Specialist

Registration (CESR), junior clinical fellow posts and senior clinical fellow posts. In addition, DTHFT has

been at the forefront of training the non-medical workforce in new roles such as Advanced Clinical

Practitioners (ACP) who have developed skills and competencies to see, diagnose and treat patients

independently of doctors. There are 66 ACPs already in post. DTHFT is hosting the Faculty of

Advanced Clinical Practice for Health Education East Midlands.

22

General Medical Council annual doctors in training surveys

46

By collaborating on these innovations, both Derbyshire and Staffordshire can benefit from best in

class training opportunities, to grow our own skilled staff in shortage specialties.

Illustrative A&E resilience initiatives

No significant changes are being proposed to the clinical model of having two 24/7 A&Es at each

site. If we were a single service a series of initiatives would be implemented using a single strategy,

to address the existing challenges at both Trusts, these include:

Joint CESR training and appointment of additional clinical fellows, to address consultant and

middle grade shortages

Best practice sharing in ACP, enhanced nurse practitioner development and pit stop processes23

Joint recruitment and rotational posts

Joint reporting frameworks and operational planning meetings

Access to IV antibiotics at home (Outpatient Parenteral Antibiotic therapy - OPAT) and Virtual

Ward for BHFT patients

Implementation of GP Triage at BHFT in a similar model as DTHFT.

Illustrative example: Acute medicine resilience initiatives

No significant changes are being proposed to the clinical model of having two acute medicine

departments at each site. If we were a single service a series of initiatives would be implemented

using a single strategy, to address the existing challenges at both Trusts, these include:

Shared resources, approaches and common workforce models to address shortages in medical

posts and medical assessment unit nursing shortages

Sharing models of care: Ambulatory care centre; GP triage

Shared learning e.g. Discharge processes, CESR approach

Benefits to patients would include BHFT patients gaining access to the established OPAT service at

DTHFT, which isn’t currently commissioned for Staffordshire patients. Patients attending both Trust

sites would also benefit from developments in the ambulatory care centre pathway. A&E waiting

times should improve from best-practice sharing and refining clinical processes to manage demand

and flow.

Benefits of joint workforce planning under a single clinical strategy include the potential to

increase our substantive workforce and reduce our reliance on agency or temporary staff, also

reducing premium costs (via joint recruitment to junior clinical fellow, CESR, ACP posts and enable

potential rotation). Deploying a single people strategy across both sites could improve retention,

education and training.

23 A&E pit stop is an effective way of getting new arrivals to the most appropriate care and maintaining flow. The aim is to focus on moving

the patient through the department as quickly as possible and where appropriate this is supported by published and standardised

ambulatory care pathways for patients who can be immediately transferred from A&E to the Ambulatory Care Centre for fast track

diagnostics and treatment before being discharged home rather than being admitted to a hospital bed.

47

4.1.3 Develop a sustainable surgical model offering excellent outcomes, productivity and

equality access to both populations:

Illustrative service line development example: Orthopaedics

Strategic context (current challenges) – orthopaedic workloads are increasing, due to increasing co-

morbidities of elderly service users. Both our Trusts are challenged with increasing demand in some

sub specialties and, to meet the demands, have to transfer activity to surrounding acute care

providers, including private sector providers. We also pay for waiting list initiative work to be carried

out over weekends.

The proposed model –involves all activity being delivered through a single service across three sites

(Burton, Tamworth and Derby). All trauma, elective cases and day case activity would be

consolidated into single services. The Tamworth site would continue to be utilised for clinic and day

case activity. There would be a flexible workforce model and surgeons from both Trusts would work

across all sites; this would also include a joint on-call rota. Improved efficiency from implementing

this model would create capacity to repatriate activity from the private sector. In the long-term,

there is potential to develop a dedicated facility for elective activity.

Benefits to workforce sustainability - As a result of having a shared workforce, there would be

potential to achieve GIRFT accreditation for specialty cases e.g. spinal surgery (because the

population served and consultant workforce will increase in an integrated organisation). Joint out of

hours cover and better servicing of on call rotas could result, due to a larger pool of consultants and

middle grades. A larger service would also improve recruitment prospects for both organisations.

The expected patient benefits are outlined in the table overleaf.

48

Expected Patient Benefits – Orthopaedics

We anticipate improved clinical outcomes through shared processes and protocols and from seeing patients at the optimal time in their pathway. When considering fractured neck of femur patients, the benefits of cohorting on one site would include a reduction in length of stay which would positively affect mortality as the odds of death following procedure raise significantly after 14 days for these patients. There would also be Improved access to more sustainable orthogeriatric cover, which clinic studies have confirmed reduce mean LoS and mortality.24

There would also be reduced waiting times through improved productivity. There is potential for increased operating capacity by extending the working day, resulting in achievement of the 18 week RTT, which ensures that patients suffer less pain and their quality of life is improved. For emergency fractured neck of femur patients, achievement of the time to theatre best practice criteria will improve outcomes for patients. Earlier surgery is associated with better functional outcome and lower rates of perioperative complications and mortality25. DTHFT currently send 80% of their fractured neck of femur patients to theatre within 36 hours and BHFT send 100% therefore there is potential to improve this access for up to 100 patients per year.26 In addition to the achievement of national access targets already described, the increased number of consultants on the on call rota could result in the 14-hour to review standard within the 7-day working stipulations being more consistently met.

The availability of fracture clinic slots would be improved as BHFT current practice prohibits next day

appointment slots and leaves patients either waiting in ED or for a number of days until they can get

an appointment. DTHFT patients are guaranteed a next day slot Monday to Friday. Both services

would need to consider their additional requirements for a full 7 day service.

24 Source Clin Interv Aging. 2016; 11: 843–856. Published online 2016 Jun 24

25 Source:Indian J Orthop. 2011 Jan-Mar; 45(1): 27–3

26 Source: National Hip Fracture Database

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4928624/

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3004074/

49

4.1.4 Develop best in class medical and day case and facilities:

Illustrative service line development example: Endoscopy

Strategic context (current challenges) – both Trusts are predicting significant demand growth of

around 44% over the next 5 years (in line with the new cancer strategy and screening changes as

detailed in the ‘scoping the future’ document). Both Trusts have bespoke endoscopy suites for

inpatient, outpatient and emergency procedures but there are differences in the patient pathway.

The proposed model – the collaboration model does not involve significant changes to either Trust’s

current delivery models. In the short-term, there would be a merged workforce, working mainly on

home sites. In the long term, the specialty would move to a formal cross covering arrangement

which would be facilitated through joint job planning. Decontamination would still remain on both

sites and would continue to feed the community hospital sites.

Benefits to workforce sustainability – arise from having a single merged workforce, cross-covering

both sites in the long-term model. This would improve our ability to cover sickness and leave.

Through shared departmental job planning, there would be improved list coverage, utilisation and

cross fertilisation of good practice.

Expected Patient Benefits – Endoscopy

A single endoscopy service for the populations served by BHFT and DTHFT will provide patients with Patient access will improve through expansion of services at Tamworth and re-establishment of a full service at Ilkeston. In the long-term, there will be reduced waiting times through pooled waiting lists, better use of capacity and improved patient access as a result of extended opening hours. This would be beneficial especially in the urgent cancer referral patients of which there are.27 It would also ensure that patients who are under surveillance are seen at the most optimal time in accordance with national clinical guidance which would positively affect 5068 patients across both trusts28.The OOH emergency cover would improve, as all OOH emergencies would transfer to Derby, improving emergency access for 13 patients per year.

27

5939 per year across both organisations (ref) source: BHFT – Meditech, DTHFT Lorenzo 28

Source of data: BHFT – Meditech and DTHFT – Lorenzo

50

4.1.6 Develop best in class investigations facilities:

Illustrative service line development example: Radiology

Strategic context (current challenges) – there are significant local and national workforce shortages

for radiology. BHFT requires more consultant and junior grade radiologists, as well as additional

sonographers. This is to support reporting, multi-disciplinary team and interventional services across

the sub specialties. DTHFT faces skill-mix challenges related to over-reliance on consultant

radiologists and also needs more radiographers to enable skill-mix improvements.

Diagnostic radiology is under pressure to deliver against national examination and waiting targets,

particularly for inpatients and A&E. The BHFT nuclear medicine service is also unsustainable, due to

ageing equipment and staff recruitment issues. The BHFT site does not have Imaging Services

Accreditation Scheme (ISAS) accreditation, which is the quality standard for radiology services.

Whilst the service can operate without accreditation it is best practice and would improve service

resilience.

The proposed model – there would be a single modality service based model across both sites and

the BHFT nuclear medicine service would be transferred to DTHFT. There would be a joint

management and operational structure across sites, and a compliance team would be established to

manage the ISAS accreditation process and other administration.

Benefits to workforce sustainability – we expect our workforce requirements to increase in line

with demand increases. Economies of scale from the collaboration model will be minimal due to the

number of peripheral sites, but financial benefits will materialise from a reduction in agency spend.

There would also be further benefit from joint recruitment initiatives, which are already taking

place, and from improved recruitment prospects as a larger unit.

Impact on operational performance - as a single unit, we would improve our capacity by spreading

activity across both acute hospital sites and the community hospitals. There would be improved

waiting times due to increased scanning capacity across both estates. There would also be improved

reporting time, which would improve our RTT performance. Diagnostic waiting times for cancer

pathways would reduce, as the service becomes more efficient, improving the achievement of

cancer waiting time targets. This would have a related beneficial impact on the diagnostic element

of the A&E 4-hour target.

Expected Patient Benefits – Radiology

The proposed clinical model will create a more stable, single workforce that has increased specialist expertise, providing services to patients across community locations closer to their homes. This would reduce waiting times for some of the more specialist diagnostics procedures and provide a more consistent service and pathway across all sites, ensuring patients receive the same standard of care, regardless of location. It would also provide the opportunity to hot report for ED and inpatients at night. At weekends the new model would improve flow and reduce LoS as faster diagnoses are made. The on call reporting burden at BHFT would be reduced significantly as there would be an opportunity to report remotely from DTHFT once the clinical teams are up to full establishment. There will be a consistent interventional radiology team serving the BHFT population. Currently this is a single consultant service at BHFT which results in delays to investigation for 10 weeks in a year.

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4.1.7 Address national quality issues via consolidating complex emergency services to one site,

whilst ensuring patients can access local tertiary services:

Illustrative service line development example: Stroke

Strategic context (current challenges) - Future stroke service would be required to support between

750-1000 strokes per annum (NHSE guidance). BHFT sees circa 450 confirmed strokes per annum

(due to size of population served) and DTHFT sees ~900-1000. Mortality rates at BHFT are higher

than those at DTHFT. In addition to the above risks, BHFT has issues with its limited early supported

stroke discharge capacity, service sustainability (no full time stroke consultants), lack of ability to

deliver 24 hour consultant administered thrombolysis and 7 day transient ischaemic attack (TIA)

service.

Thrombectomy national guidance which is clinical best practice will require acute access to specialist

service for thrombectomy from a tertiary provider envisaged to be NUHT.

The proposed model the proposed clinical model is for all BHFT stroke patients to be seen at DTHFT

except rehabilitation and follow up clinics. This means for BHFT patients, DTHFT will deliver the

service for hyper acute, acute, mimic strokes and TIA clinics 7 days per week.

Benefits to workforce Sustainability – there may be opportunities to improve recruitment as a

larger unit. A flexible staffing model across sites would allow all staff to experience hyper acute care

and opportunities to cross-cover and rotate between sites. Junior staff would also benefit from a

joint approach to training and education.

Research and Education benefits include stroke skills being maintained at both Trusts; two

consultants from our trusts are already employed by the University and this research could benefit

the entire team. A larger population base would provide greater opportunity for research and

recruitment to trials.

Operational performance - there would be a length of stay benefit to both organisations from the

proposed model. If Early Supported Discharge (ESD) is adopted across both Staffordshire and

southern Derbyshire, this would improve flow out to the community. Service sustainability is a key

consideration for BHFT as the service is currently only supported by two consultants as part of their

job plan.

The expected patient benefits are outlined in the table overleaf.

52

Expected Patient Benefits – Stroke

East Staffordshire’s population do not currently receive a 7 day, consultant administered service and would therefore benefit from this model. The model should result in improved clinical outcomes from reduced waiting times for TIA at weekends at BHFT which would positively affect 37 patients per year29. Reduced time to consultant review and to thrombolysis would also expedite access to scans and therapy services due to the increase in clinical decision making.

At DTHFT, the Trust already provides a full hyper acute and TIA service 7 days per week, meeting the national stroke specification. A combined model may address the aforementioned risks in the following ways:

Catchment population – an increased volume of patients would result in the target population being achieved.

Improved Outcomes ; dual site service models have shown: o Reduced mortality rates at 3, 30 and 90 days, 17%, 7%, and 5% respectively, which

would ultimately save 15 lives per year30 o Length of stay reductions (Manchester - 2.0 days, London - 1.4 days)

Clinical experience would improve (access to consultant care 7 days a week) and mortality rates for the BHFT population would be expected to improve in line with the DTHFT outcomes.

In the long term, improved outcomes would reduce the levels of disability following a stroke. This has significant patient benefits and reduces costs by c.6% per patient (Harvard Business Review).

Illustrative service line development example: Cardiology

Strategic context - BHFT cardiology service cannot provide Primary Percutaneous Coronary

Intervention (PPCI) and Percutaneous Coronary Intervention (PCI) to its patient population as it is

not BCIS accredited to deliver this service. This means 290 (270 PCIs and 20 PPCIs) patients are sent

to either UHNM or UHL for completion of their treatment, c.30 miles from BHFT. In addition

cardiology patients seen at the Tamworth and Lichfield sites are seen by HEFT consultants and the

onward treatment for Angioplasty and PCI (750 Angios and 250 PCIs) are delivered by HEFT

consultants at UHB.

The key limiting factor for gaining British Cardiovascular Intervention Society (BCIS) has been the

inability to provide sufficiently robust interventional cardiologist on-call arrangements. Service size

has been raised as a risk for accreditation, as guidance suggests between 200 and 400 PCIs should be

delivered per site and 75 per consultant. If the work described above was repatriated, the BHFT

service would meet these requirements. BHFT are recruiting for an Interventional Radiologist and

will have 3 whole time equivalent in post.

29

Source: Clinical deep dive Jan to Mar 2017 30

Source: Calculation based on data provided on stroke discharges, excess deaths and the difference between stroke mortality rates for both trusts, between April – November 2016.

https://en.wikipedia.org/wiki/Percutaneous_coronary_intervention



53

Complex devices are currently provided by tertiary centres for both BHFT and DTHFT. There are

concerns that this creates delays and introduces patient risk in the pathway, which could be reduced

by commissioning this service from DTHFT (specialist commissioning). This relates to 50 BHFT

patients and 150 DTHFT patients.

The proposed model – The future model is for a single cardiology service with a combined

consultant cover across all sites. This will assist BHFT to attain BCIS accreditation, which would

enable the repatriation of activity from HEFT, UHNM, UHL, UHB and NUH. Both sites would have

catheter labs and on-site Angiography and PCI. The future vision is to also repatriate complex

devices from UHL, UHB and NUH, should specialist commissioning approve the service.

Benefits to workforce sustainability - A single service will significantly increase the resilience of the cardiology speciality across all sites, as we would have access to a larger consultant body (14 total vs, 5 and 9 at BHFT and DTHFT respectively) and a significantly larger population base. This supports the transition towards seven day services and potentially could avoid the appointment of additional consultants to meet the 7 day standards.

The provision of in-house PCI treatment for BHFT patients, improved service prestige and long-term

sustainability of both departments may support future recruitment prospects. Additional workforce

benefits include less travel time for consultants to tertiary centres and improved attractiveness to

trainee doctors.

Operational performance – the proposed model would reduce waiting times for PCIs as there would

be no need for a tertiary provider. There is a predicted reduction in length of stay of 1 day (on

average) for these patients, based on BCIS research of on-site vs. offsite PCI centres.31 A merged

service would remove resource duplications across organisations. There is also potential to roll out

ambulatory heart failure service to BHFT, which could benefit patients, reduce costs to

commissioners and create capacity for future service growth.

Enablers for Delivery - for this model to work, BCIS accreditation would need to be granted to the

BHFT site as DTHFT’s accreditation cannot be extended to BHFT. Whilst BHFT will have the minimum

consultant workforce (following recruitment) to provide OOH consultant interventional cardiologist

cover, this would just meet the minimum threshold for BCIS accreditation and is therefore not a

sustainable long-term solution. If BHFT partners with DTHFT, the trust would gain access to enough

Consultants to run a robust out of hours rota.

Risks to delivery - BCIS accreditation is granted through a third party review of services and there is

a risk that there may be other issues that require resolution, in addition to the out of hours issue.

Complex commissioning arrangements in East Staffordshire (delegated to Virgin care) could

compromise the scheme e.g. if they do not wish to commission the PCI service. DTHFT already has

accreditation to provide PPCIs through specialist commissioning. We may also require approval from

surrounding trusts for activity repatriation.

31

Source: BCIS Audit Returns – Adult Interventional procedures , British Cardiovascular Intervention Society (2014)

54

Expected Patient Benefits – Cardiology

Patients who require both angioplasty and PCI procedures in East Staffordshire would benefit from the new model’s streamlined pathway, as PCI would be provided at BHFT. NHS England (NHSE) guidance is also encouraging Trusts to perform onsite angiography and PCI at the same visit, by withdrawing future funding for the initial angiogram procedure if this service redesign isn’t implemented. Patients would also benefit by having one less attendance if needing an angiogram and PCI as it could be done in one visit.

Additionally the outpatient work currently provided by HEFT at Lichfield and Tamworth could be repatriated to BHFT and the subsequent angiograms and PCIs could be delivered at BHFT. This would mean patients do not have to travel to UHB. If complex devices are commissioned from DTHFT by specialist commissioning then DTHFT could become the cardiac centre for the collaboration and patients would not need to travel to UHL, NUH, or, UHNM for their care. This would be of benefit to 270 patients per year for patients requiring a procedure at another centre following diagnostic at BHFT.32

If Derby were to take on the complex devices from the other current providers as is planned, patients will have the opportunity to have their device fitted closer to their homes, positively benefitting 200 patients and their families per year33.

Through collaboration it would be possible to have joint appointments of clinical staff across sites. There would also be opportunities for joint service development/sharing of good practice (e.g. ambulatory heart failure roll out to BHFT) and a combined approach for Research and Development, spanning 2 Clinical Research Networks and 2 Educational Regions.

4.1.8 Repatriating work and integrating teams

Service line development example: Breast screening and breast surgery

Strategic context (current challenges) – both sites have Breast Units that deliver the same range of

care to patients, albeit through different pathways. UHNM currently provide the screening service

for the BHFT screening population and the Symptomatic Breast is CCG commissioned and provided

by BHFT on the Burton site with support from UHNM. BHFT operates the symptomatic and

treatment pathways for their patients together with UHNM radiologist support and UCW support for

the pathology input to multidisciplinary clinics at Queen’s Hospital. UHNM cease to provide all these

services to BHFT from April 2017.

The proposed model – the proposal is to develop a single breast unit operating across both sites and

DTHFT would be the lead provider and contract holder for breast screening and symptomatic

programmes. This model involves a single approach to administering and managing patients, a joint

multi-disciplinary team, joint symptomatic pathway and a single surgical and oncology team. A

32

Source: Cardiology clinical deep dive – Jan to Mar 2017 33

Source: cardiology clinical deep dive – Jan to Mar 2017

55

combined patient list would be managed, clinical teams would rotate between sites for clinics and all

administrative and tracking functions would be located in Derby.

Benefits to the model – the key benefits from this model relate to the quality of service for BHFT

surgical patients who have been impacted by the reduced service from UHNM. We anticipate that

there would be reduced waiting times, improved service quality and reduced variation through

streamlining this pathway. There would potentially be an increase in patient access by exploring the

option of providing surgery at either site and providing asymmetry surgery for East Staffordshire

patients (subject to commissioner approval). Increases in multi-disciplinary sessions and increased

consultant presence would also result in quicker treatment.

In collaboration, our unit would be one of the largest breast unit programmes in England, which may

attract larger studies. We may also be selected as a priority site for research, as we would have a

greater population to recruit from.

Workforce sustainability – the key workforce benefits relate to improved recruitment prospects, as

a larger organisation. In particular, we would be a more attractive unit for trainees due to the service

size and the benefit of a larger consultant body.

Impact on operational performance – There would be an overall improvement in service resilience,

including improved patient administration and tracking, a more efficient clinic pathway and

appropriate staffing levels to manage demand. Our current cancer target performance is good; this

would be maintained or improved due to reductions in waiting times, increased efficiency and better

capacity utilisation (due to reduced cancellations).

Expected Patient Benefits – Breast screening

DTHFT will take on the service in its entirety for screening, symptomatic and surgery for both organisations; this will improve service stability and bring care closer to home for complex BHFT patients that were previously referred out to other providers. The proposal to run the breast service as a single service across both organisations will provide improved clinical pathways, an equitable reconstructive surgical offer and stable screening pathways for the whole population.

4.1.9 Delivering high quality cancer services to the population

Service line development example: Oncology

Strategic context (current challenges) – we have a strong historical culture of joint working in the

oncology service. The medical cover for BHFT oncology is provided by DTHFT oncologists, although

BHFT currently has a locum in post to support these clinics, due to recruitment issues at DTHFT. We

also share the same protocols for chemotherapy across oncology and haematology, in alignment

with the East Midlands Cancer Network. There is a requirement to standardise procedures across

both Trusts and we also need to implement chemotherapy care (electronic prescribing) across both

sites.

The proposed model – the proposal involves developing a single service model, including a single

clinical and operational management structure, standard operating procedures and policies across

56

sites and a single research and development service. Chemotherapy will be introduced at all sites, as

a priority. As DTHFT operates a paper-based system and BHFT uses a different electronic solution,

mixed systems would introduce clinical risk. In the long term, there would be improvements to the

acute oncology pathway, including centralisation of emergency inpatient admissions, provision of a

7-day acute oncology service and development of a shared hyper-acute pathway (SCC and SVCO).

The clinical pathways would need to be aligned to reflect a movement from inpatient to day case

activity e.g. at BHFT Hospitals the majority of ascetic drains are provided as day cases and this

practice should be replicated at DTHFT. There would also be a shared single chemotherapy

pharmacy.

Workforce sustainability - if demand continues to grow at DTHFT, there may be a point at which

DTHFT can no longer provide medical cover across two organisations. The recruitment plan will

ensure that current demand is met across both organisations allowing for the ongoing provision of

chemotherapy treatment at BHFT.

Impact on operational performance – increases in the consultant workforce would improve our

performance against cancer waiting time standards for first oncological treatments. There would be

further improvements to cancer waiting times from avoiding patient transfers across Trusts,

reductions in length of stay and admission avoidance benefits from a centralised hyper acute

oncology pathway.

Enablers for Delivery – the IT infrastructure for both Trusts would need to be aligned, including a

single electronic chemotherapy prescribing system, CRIS and PAS systems. An appropriate IT solution

would also need to be implemented for the aseptic unit at BHFT.

Risks to delivery – the BHFT aseptic lab closed in April 2017. BHFT is now purchasing chemotherapy

drugs from an external provider and, in addition, is producing some chemotherapy drugs in DHFT’s

aseptic facilities. There is a financial risk of implementing this model under a service that is not fully

merged, as this would require implementation of a profit sharing arrangement.

Expected Patient Benefits – Oncology

The single service model would eliminate service variation. This means that patients would receive the same service and access to the same range of treatments, regardless of site. They would also benefit from the combined best practice that both services currently offer, with the aim of more patients being able to be treated closer to home. As a larger oncology service there may be the opportunity to increase the range of treatments available to patients, especially within radiotherapy such as Prostate Brachytherapy. A number of patients could benefit from localised care and delivery of chemotherapy at all community hospital sites.

4.1.10 Considerations relating to deliverability of these examples against organisational form

options

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Our ambition to deliver the service changes described above is similar whether we enter a group

structure or merger. However there are some key differences in respect to our ability to deliver

these changes through the organisational forms of group structure vs. merger. The detail of which is

described in Appendix 19d with high level differences described below.

Delivery through group structure forms:

Delivery of the service improvements through group structure organisational forms, require the

implementation of robust contract mechanisms alongside delegating decision making via

committees in common, in order to create pseudo arrangements for the two separate statutory

Trusts to develop joint governance, effective joint systems, joint workforce protocols and agreed

financial risk sharing to run single services across sites. See Appendix 16 and 17.

Operationally there are complexities to consider, as two statutory entities remain, the existence of

two patient tracking lists, two separate reporting systems and staff employed by two separate

organisations, potentially create challenges to ensure equitable waiting times across sites and

deliver the desired patient benefits.

Under the group structure models we would aim to see single clinical teams delivering services

across sites, although potentially it would be more difficult to manage the workforce given separate

organisations with competing priorities. Additionally accountability remains with the Trusts’ Boards as

such there may be limits to what could be achieved compared to under a merger scenario in relation to

integration of services.

Delivery through merger forms:

A merger would allow change at pace and scale via:

Creating the impetus to establish single clinical teams to deliver a common service for the

combined population

Integrating one patient tracker list to manage patient pathways and deliver equitable wait times

in the short term and implementing one IT system in the long term

Implementing a single clear governance structure to align staff and create clear accountability

for lead divisional teams across sites.

The number of duplicate teams across specialties and support service functions is substantial

and so the benefits of a merged organisation would be to do this and to manage it as one, rather

than service by service through SLAs.

Additionally for specific service changes discussed:

We believe BCIS accreditation would be dependent on a merged organisation. As a sovereign

organisation BHFT is unlikely to secure BCIS accreditation, the limited population BHFT covers is not

sufficient to allow the requisite number of procedures to take place and BCIS guidance states

services delivering PCI should have extended cover by local consultant interventional cardiologists.

Currently BHFT have 3 interventional cardiologists which would not allow for adequate consultant

cover (it is estimated that 6 would be needed). Thus BHFT would not be compliant with BCIS

guidance and joining with DTHFT would give enough consultants to fulfil a compliant rota and will

cover a larger population to a reach the required number of interventional procedures.

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4.2 Risks to delivery and enablers for clinical benefits

Most service outlined that the IT infrastructure for both Trusts would need to be aligned. For some

services there are specific systems that need to be aligned, where these have been identified e.g.

Chemocare, these have been outlined above. At Trust level the to support the effective

management of patients across single services in a merged Trust or otherwise, a single Electronic an

interim solution could be developed across sites in the short term, with a single Patient Record (EPR)

needing to be considered in the long term, see Appendix 25 for options evaluation. In the long term

for the IT solution preliminary estimates which require further development have been outlined at a

range of £5.0m to £10million (these costs have not been included in the financial modelling of this

OBC, as further work is required as outlined in Appendix 25).

During the deep dives common risks were identified including workforce risks associated with

change, including retention due to uncertainty. Risks of this nature would be managed accordingly

through an organisational development plan in a merger scenario, and via contractual arrangements

in a joint venture scenario.

4.3 Shared services benefits

The vision for shared services and benefits from collaborative work developed to date are outlined

below.

4.3.1 Vision for shared services

The Trusts shared services underpin our ability to deliver exceptional patient care to our catchment

populations in Derbyshire, Staffordshire, Leicestershire and beyond. In a merged structure we can

apply the best practices and innovations developed within our separate organisations to provide a

responsive, efficient and adaptable service with standardised processes and unified teams providing

a consistent level of performance. The proposed changes are also in line with Lord Carter’s guidance

to deliver more efficient services through the consolidation of back office functions.

By utilising the existing space occupied by the teams and operating through a more streamlined

structure the back office services will maintain site presence and benefits associated with the co-

location of functions. A number of the opportunities for closer working are also deliverable under

both group and merged structures and initial mobilisation began in 2017/18.

Each shared service area was also asked to consider how their respective services would be provided

under a group organisational structure. Bottom up costings were created for each area reflecting the

level of integration the SRO felt would be achievable in each scenario dependent upon statutory

requirements and reporting needs. The resulting financial analysis across these options is outlined in

Appendix 19a.

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4.3.2 Shared services benefits

Working closely with service leads we continued to develop the operational and financial case for

shared service collaboration to support our OBC, with particular focus on carrying out ‘deep dives’

for prioritised shared services (HR, operations, IT, medical records, finance and procurement). The

purpose of these deep dives was to explore the more complex areas in more depth and develop

clearer plans including:

- Current and future operational models

- Workforce / Estates / IT impacts

- High level implementation timelines

- Key delivery risks

- Breakdown of financial opportunities

The output of this work was a joint operating model which enabled us to revise the assumptions and

update the financial case where appropriate.

For all shared services not covered by a deep dive, together with service leads, we considered at a

high level whether the assumptions for joint working continue to hold true for merger and group

structure, updating the financial case where appropriate. Areas covered included:

- Board;

- Pharmacy;

- Medical Electronics;

- Estates and Facilities;

- Corporate Medical;

- Corporate Nursing;

- Governance;

- Information;

- Communications; and

- Pathology.

4.3.3 Example case studies of shared service benefits

A summary of the proposed changes in each of the services included in the deep dives is

summarised below:

HR: In a merged or group form the two HR functions will move to a single structure with

standardised policies and procedures. DTHFT would take on provision of occupational health and

payroll services and further efficiencies will be delivered through utilising excess capacity on

DTHFT’s TRAC recruitment system and shifting to a single centralised call centre. To deliver these

opportunities the Trusts will move to a single shared Electronic Staff Record (under merger) and

roll out standardised reporting.

Operations: Working with the CEOs and COOs a new divisional structure has been developed

with four divisions: Medicine, Surgery, Women’s and Children’s and Support Services. This allows

60

all elements of the urgent care pathway to be within one division while keeping complementary

services together i.e. ICU, Theatres and Surgical specialities within the Surgery division.

IT: Appendix 25 describes the options considered to date for IT solutions in a merged organisation. To support the effective management of patients in a merged Trust a single Electronic Patient Record (EPR) would be implemented in the long term. This will reduce the systems in use, provide full access to patient records across sites, allow integrated reporting and allow a single team to be deployed. Due to the time taken to effectively deploy a single EPR system an interim interfacing solution will also be put in place. This will use a Patient Master Index (PMI), a shared repository of electronic documents and connected results reporting to provide all the functionality in the short term to support the changes to clinical pathways. Some opportunities have been included through shifting to single systems and unifying the team structure however the values of further opportunities including a shared PACS / RIS and IT services have not yet been finalised. In the long term for the IT solution preliminary estimates which require further development have been outlined at a range of £5.0m to £10million (these costs have not been included in the financial modelling of this OBC, as further work is required as outlined in Appendix 25).

Medical Records: DTHFT already have a significant medical records transformation programme

in place with planned delivery of £0.9m of efficiency savings in 2017/18 BHFT are further

advanced along their own transformation programme but still have significant plans to further

develop the service they are providing. Both Trusts’ plans include accelerating e-case notes

programmes and the destruction of notes (in line with national policies) to reduce the cost of

additional storage. Opportunities identified through the deep dive work are limited to a unified

management structure and some reductions in storage costs however the cross fertilisation and

leveraging of BHFT’s team experience on the e-case note journey will be very valuable to the

success of both programmes.

Finance: In a merged organisation the Trust will have a single set of statutory accounts and will

move to a single bank account, a single financial ledger, and one internal and one external audit.

This will release efficiencies across functions as the requirement for separate Financial

Accounting, Debtors, Creditors, Treasury, Capital and Contracting is removed. One Trust Board

and One Finance Committee will be established and Consolidated SFIs, Standing Orders and

Schemes of Delegation will be put in place. Under a group structure there is still a requirement

for two sets of statutory accounts etc., so a much lower level of opportunity has been identified.

Procurement: There are a number of opportunities to deliver efficiencies within Procurement

under a merged or group structure through non-pay savings, a streamlined team and common

systems / processes. Within non-pay a number of opportunities for collaboration have already

been identified i.e. orthotics and further opportunities have been discussed at clinical workshops

around standardising consumables and prosthetics. Moving to a more streamlined team with

consolidated category management can also be implemented when a shared system is in place

as well as reducing the hub contract and deploying a shared help-desk.

The deep dive reviews also covered IT, estates and workforce impacts to ensure plans have factored

in interdependencies and provide a realistic blueprint for how these areas will function in a

combined organisation.

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Within each non-deep dive area work has also been completed with the respective executive

directors to define the management structure and identify potential opportunity areas. These have

been quantified and form the basis of the values included within the financial model for “Shared

services”. Further work will be undertaken at FBC stage to finalise the plans in non-deep dive areas

with further engagement with staff teams and account for the wider interdependencies such as:

Positioning teams to maintain communication channels with staff whilst ensuring effective

utilisation of the current estate footprint

Interfacing current IT systems during the transitional period and developing plans to move

to single systems and processes

Ensuring the career paths and development opportunities created by the merger are clearly

articulated and talent management strategies are put in place.

4.4 Staff benefits

There are a number of benefits for staff in relation to working increasingly together. Across our two

organisations there are examples of newly evolved roles which could be shared and ‘scaled up,’ roles

such as:

Junior Clinical Fellow (JCF) that have been used to address rota gaps left vacant by the East

Midlands Deanery (this role is similar to a Foundation Year 3 doctor) at DTHFT

CESR programme supports doctors looking for an alternative path to consultant status at DTHFT

Similar roles are being developed and offered in nursing and allied health professional specialties

in the form of Advanced Clinical Practitioners and Assistant Practitioners at both organisations.

The way in which these jobs are recruited to and managed can be shared, as well as incorporated

into our long term workforce planning, contributing to the attractiveness of the employment offer

across our organisations.

From a leadership and management development perspective integrating these portfolios will give

staff a richer depth of opportunity to that which is offered as individual organisations, as by working

together each organisation’s talent map is instantly bolstered.

In terms of different job prospects and development opportunities, working together will afford staff

access to a far greater pool of opportunity. Increasingly staff want to try new employment paths and

want to move within one organisation. Collaborative working enables this to happen without the

loss of talent and subsequently organisational memory. From a Human Resource (HR) perspective

working together will give the opportunity to streamline work related policies and optimise

developments in areas such as recruitment and retention. A larger organisation will provide

increased opportunities for redeployment should the need arise to reduce the workforce. By

streamlining HR processes this will support the efficiency agenda and play a key role in each Trust

achieving the recommendations as described by the recent Carter review. We will both be able to

offer a much greater field of educational and employment opportunities if we work together.

Both organisations recognise that a large scale cultural and behavioural change programme is

required to ensure the successful implementation of cross-site working which is fundamental to the

delivery of a combined clinical strategy. Our aim will be to create a unifying culture that supports

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high quality care whilst valuing and celebrating difference both between and within the two

organisations (e.g. Burton community hospitals). To enable this, our cultural objectives to support

the integration of the two organisations are aligned to ‘Developing cultures of high quality care in

the NHS’ (Kings Fund). These objectives will be integrated into the organisational development plan.

4.4.1 Education and Training

To meet the challenges and maximise the opportunities of the future, both Trusts, together with our

surrounding health and social care organisations, need to develop strategies and create the

development opportunities for our workforce that will support the changes which will be required.

Our educational strategy needs to:

Develop highly specialised skills to respond to technological advances

Support the delivery of improved population health outcomes, reduced variation in quality

of care and access to safe 7 day services

Ensure staff are trained to work flexibly across different organisations and sectors

Work with an ever increasing focus on Patient Experience.

Current research shows that there are generational concepts that require consideration if we are to

appropriately support individuals as they begin their professional careers. For the first time in history

four different generations will be working together in the same employment environment. There are

generational differences in values, expectations, perceptions and motivations in the current

workforce and these are highly relevant in terms of staff education and engagement. Understanding

differing motivational needs across these generations offers employers and education providers a

real opportunity to better align support to meet individual needs and to improve recruitment and

retention.

Whilst developing this strategy there are a number of key themes we will use for the basis of our

work which are as follows:

Development for recruitment and retention of the workforce

Generational research – There has been extensive generational research based around the

Birmingham area, however because of the significant differences in demographics in

Derbyshire and South Staffordshire, there needs to be some checking out of validity of the

research to our area

Creating a flexible workforce

Innovation, creating opportunities for income generation

Aims:

Involve and engage our staff in their own development

Ensure we take account of generational research to develop our workforce

Develop our staff to enable them to work flexibly across the health economy

Develop our business to generate income and enable us to re-invest that money in

developing our people

4.5 Financial benefits

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The risk adjusted financial benefits for clinical services are outlined in chapter 5 and range from

£5.6m to £3.7m in the merger and group structure hybrid model respectively.

The risk adjusted financial benefits for shared services are outlined in chapter 5 and range from

£5.0m in a merger scenario to £2.5m in a group structure via committees in common.

Conclusions:

The clinical and patients benefits case provides examples of new models of service delivery which would be provided by a combined Trust. These models would provide better patient outcomes and patient experience, improve workforce sustainability and increase operational performance. Examples outlined were for endoscopy, radiology, orthopaedics, stroke, breast screening and surgery, A&E, cardiology, oncology, upper GI cancer and acute medicine.

The shared services benefits, to support delivery of our clinical services, were outlined for HR, operations, medical records, finance and procurement. These would be unified to provide a responsive efficient and adaptable eservice with standardised processes and unified teams providing a consistent level of performance.

The risk adjusted financial benefits over 5 years for the clinical case are £5.6m and for the shared service case is £5.0m (plus additional financial benefit on interest). As a consequence of these changes, we believe there would be a positive impact on the quality of our services.

Staff benefits included development and scaling up of newly evolving roles such as junior clinical fellows and advanced clinical practitioners. In addition, facilitating staff to try new employment paths across a larger more diverse organisation.

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5. Economics case – Organisational form options

This economics case outlines all options that we have considered as possible options to address our

sustainability issues and deliver the intended benefits. These include:

Other partnerships (previously considered options) – section 5.1

Options for strategic collaboration between our two organisations (long list)– section 5.2

Options for consideration now (short list)– section 5.3

This section then describes the appraisal criteria, pros and cons against the evaluation criteria, the

process to evaluate, and it recommends the merger option as the preferred organisational form to

consider further in the next phase of this programme of work. Sections include:

Assessment criteria for short listed options (section 5.4)

Pros and cons against evaluation criteria (section 5.5)

Appraisal of options (process and scoring) (section 5.6)

Support for the collaboration and constraints and dependencies are outlined in section 5.7 and 5.8

respectively.

5.1 Other partnerships (previously considered options)

These have been outlined as part of the SOC phase of work and are outlined in detail in Appendix 14.

5.2 Options for strategic collaboration between our two organisations (long list)

During development of the strategic option case, a long list of options for collaboration between

DTHFT and BHFT were identified by stakeholders in August 2016 as a possible means to addressing

the objectives and challenges of the Trusts in section 3. The Dalton review also informed the possible

range of options for organisational form changes between our organisations. This long list of options

is outlined in the figure below.

Figure 14: Long list of organisational form options

Three of these options discounted at SOC:

Informal collaboration via MOU

Collaboration partnership via contract

One operational organisation with one Executive and two Boards

The rationale for discounting these options is also outlined below:

1. Status

Quo

2. Informal

collaboration through shared

agreement

(typically MoU)

3. Contractual partnership

(includes JV, service level

contract, management)

contract)

4. One operational

organisation, one Exec team

two Boards

5. Group

structure

6.

Full merger

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Figure 15: Organisational form options discounted at SOC phase in October 2016

Organisational form

Outcome as at SOC phase – October 2016 Board approvals

Status quo Take forward to OBC - required to be considered in all options appraisals by Treasury green book good practice

Collaboration – MoU

“Two or more organisations voluntarily pool their resources, while continuing as separate legal entities, covered by a shared agreement, typically an MoU” Discounted at SOC phase, as we have been operating within this collaboration

framework for more than a year. Whilst it supports sharing learnings, it lacks the required governance infrastructure to integrate services, and drive change

This would add limited additional clinical or financial benefit to our populations and local health economy

Collaboration – contract

“Similar to above, two or more organisations pool their resources though under a more formalised contract. Includes service level contracts, joint ventures and management contracts” Discounted at SOC phase as this would add limited additional clinical or

financial benefit to our populations and local health economy Unlikely to go far enough to support delivery of transformational service

change Low mitigation of future clinical sustainability risks Improvements in quality/outcomes for patients limited to specific KPIs/details

in contracts Agreements may have a limited scope and therefore not be significantly robust

to affect change If agreements do go further (e.g. pooled budgets) this introduces complexities,

taking longer to implement, particularly if there is a SLA for each service line Cultural differences potentially not addressed through contract based model Duplication of regulation and financial reporting processes, as Trusts are

separate entities

One operational organisation, one Exec, two Boards

“Joint operational and Executive team. Similar to a combined organisation but maintaining two separate legal entities with separate Boards” Discounted at SOC phase as this would add limited additional clinical or

financial benefit to our populations and local health economy Duplication as still two ongoing statutory bodies:

o Costs of two governing Boards remain o Two Patient Tracking Lists (PTLs) to manage o Regulation reporting for each Trust will continue o Retention of two senior management teams, although , they may be

reduced in size and cost Running joint operational teams with barriers to delivery existing such as;

o IT systems will not be integrated for booking patients in o Limits on workforce synergies such as joint on call and OOH cover

Group structure

Recommended to take forward to OBC

Merger Recommended to take forward to OBC

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5.3 Options available for collaboration now (short list)

During the OBC phase further work was undertaken to understand the group structure and merger forms. Three organisational form sessions were undertaken during this OBC phase of work (as per the figure below). Legal advice was also procured to support understanding the implications of each organisational form option.

Figure 16: Available organisational form options

The outcomes of each organisational session are outlined below:

The first session was held on the 21st of Dec 2016 with both Executive teams – this session focused on agreeing the process for determining the preferred option (Diagram above); the criteria for scoring the options; clarifying further details on the group structure form; and determining further questions for clarification.

The second session was held on the 30th of Jan 2017 with both Executive teams and 4 NED attendees, this session focussed on agreeing the form of group structure models to be considered, and an initial scoring session was undertaken on the available clinical and financial information at this date.

The third session was held on the 15th of March 2017 where both Executive teams conducted a final scoring of the available organisational form options against the criteria, to inform the recommendation in the final OBC that will go to both Boards for voting decision in June 2017.

As group structure models are nascent in form at the time of this OBC, four different variants were

explored for their pros and cons before determining which were most applicable to consider for the

collaboration. A summary of these four options are outlined below.

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Figure 17: Group structure variants considered

All group structure options were considered at the Executive workshops with legal advice sought to

understand the nuances of the different variants. Over the course of the sessions the following

considerations were discussed and resulted in the two options below not being scored.

Group structure via corporate JV:

Specific legal advice indicated that there is likely to be a negative financial impact to the 2 Trusts;

the JV or the CCG (and therefore the local health economy) regarding VAT recovery:

If the corporate JV contracts to buy in VAT-able goods and services which are within the COS

categories it may not be able to recover VAT from HMRC, as compared to an FT, resulting in a

real VAT cost. The scale of the financial impact will also be linked the size of the JV.

It is unlikely the JV could recover this cost from the CCG, unless it is reflected in an agreed price

uplift/contracting change agreement.

Also, the newly created entity would almost certainly need to apply for a registration to provide

all of the registered activities provided by it (dependent on the extent to which activities were to

be transferred into the corporate JV, it could need a registration to cover all registered activities

currently carried on by either Trust).

Group structure via Contractual JV:

The Contractual JV variant in isolation offers less than the Hybrid group structure variant, (which is a

combination of Committees in Common and a Contractual JV). For simplicity we agreed for it not to

be included in the scoring session, and we also noted that the drawbacks of the contractual joint

venture model identified in the SOC phase (including limited additional clinical or financial benefit,

limited scope and being unlikely to support delivery of transformational service change) would also

apply to this group structure model.

Therefore the four organizational forms available for scoring in our shortlist area outlined below:

Group structure variant Description /example

1 – Group structure via

Committees in Common

Each provider board appoints its own Committee in Common, who

then can meet at the same time and with the same remit, existing

separate statutory organisations remain

E.g. Phase one of the Essex model

2 - Group structure via

Contractual JV

Entering into a contractual JV that is legally binding.

Such ventures do not establish a new body but can create legally

binding rights and responsibilities e.g. Contractual JV for pathology.

3 – Group structure via

Corporate JV

Formed via creating a new separate legal entity either:

- Company (established by shares or guarantee) or

- Limited liability partnership

E.g. Uniting Care Partnership model (LLP between 2 FTs)

E.g. GSTS (LLP between Guys/Kings/Serco)

4 – Group structure Hybrid

model (via committees in

common and contractual

JV)

The Committees in Common model can be further developed by

entering into a Contractual JV.

E.g. Phase two of the Essex Model

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Figure 18: Available organisational form options

Available Organisational form options (OBC)

Option A: Do nothing

Option B1: Group structure (committees in common route)

Option B2: Group structure (committees in common route + contractual JV)

Option C: Merger via legal acquisition

Further details of the group structure models B1 and B2 are outlined in Appendices 16 and 17

respectively.

5.4 Group structure and merger organisational structures

Through the organisational form session, high level organisational structures for each option were

developed. The advantages and disadvantages associated with either of the potential governance

models were discussed and tested with both Executives and NEDs through the OBC process and are

summarised below:

Advantages Disadvantages

Merger Simpler governance arrangement

Clear accountability

Effective arrangements for developing consensus and resolving differences

Underpins commitment to the delivery of integrated clinical and shared services

Increased financial benefits achieved.

Effectively irreversible

A more costly transaction

Potentially more ‘emotive’

Group Structure

Ease of implementation

Retains semblance of local focus

Potentially reversible

Duplicative – continued requirement for separate Annual Report & Accounts, Councils of Governors, Memberships etc.

Additional NEDs required to maintain balance of directors on residual Boards.

Complex to run and more difficult to resolve differences between Boards.

Less financial benefits achieved because of duplication.

To enable the effective operation of integrated services under a ‘group structure’ it would be

necessary to achieve the maximum possible devolution of Board responsibilities to the Committee in

Common.

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The operational management arrangements proposed for each are the same with a single CEO and

executive team in each model.

Consequently ‘Group Structure’ is seen as a more complicated and duplicative arrangement to

achieve the same operational effect of ‘Merger’. It is proposed that the simpler governance

arrangements under merger are more likely to enable the integration of services and the delivery of

the clinical and financial benefits being sought and that this longer term advantage outweighs the

additional short term cost of transaction.

5.5 Assessment criteria for short listed options

The same evaluation criteria developed for SOC phase, were approved by our joint Executive teams

in the first OBC organisational form meeting on 21 December 2016.

The four key criteria are:

a. Quality and sustainability impact: this is driven from the clinical workshop design principles set

in the SOC phase:

i. Can the standard of service provision and delivery model be improved for the population

who access services?

ii. Can the service be more efficient?

iii. Could the service be unsustainable in the medium term (next 12 months to 3 years)?

iv. Does the service pose a risk to other services being delivered?

b. Financial impact: this examines the extent of improvement in our combined financial position in

future collaboration forms.

c. Strategic alignment: this considers the organisational form against the delivery of STPs and

other partnerships we each already have in place.

d. Deliverability: this looks at what stakeholder support we need and how quickly and easily the

chosen organisational form will be developed.

The final agreed set of criteria and weightings are shown below in the figure below. Figure 19: Assessment criteria for short listed options

Criteria

Sub criteria Weighting (%)

Quality and Sustainability impact

Improves NHS services provided by both of our Trusts resulting in a benefit for the populations served

20 40

Improves the sustainability of services 20

Financial impact

Improves the financial positions of the combined Trusts (or a single merged Trust), and therefore, the financial position of the local health economy

30 30

Strategic alignment

Supports the alliance with both STPs 10 15

Supports other strategic partnerships 5

Deliverability Stakeholder support 5 15

Ease and speed of implementation 10

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In the scoring template (see Appendix 18) the evaluation criteria and sub criteria were assessed

against each of the organisational forms. Each option was scored out of five against the evaluation

sub-criteria, using the following scale:

Scoring scale

Both Executive teams scored the 4 available options against the scale for scoring 1 to 5 outlined

below.

Figure 20: Scoring scale

Score Description

1 Organisational form option has a significant negative impact

2 Organisational form option has a slight negative impact

3 Organisational form option does not have a positive or negative impact

4 Organisational form option has a slight positive impact

5 Organisational form option has a significant positive impact

Each sub-criteria is scored on a scale of 1 to 5, therefore once the weightings have been applied the

maximum possible score is 500, the maximum score for each criteria is set out below:

Figure 21: Scoring scale and weighting

Criteria Total weighting Maximum score (weighting x 5 max

score)

Quality and Sustainability impact 40 200

Financial impact 30 150

Strategic alignment 15 75

Deliverability 15 75

Total 100% 500 max score

5.6 Appraisal of options (scoring)9

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5.6.1 Pros and cons against evaluation criteria

The pros/cons/ supporting evidence evaluated against evaluation criteria are outlined in Appendix

19a through to Appendix 19d.

5.6.2 Scoring outcome

The figure below shows the ranks of the organisation form by the highest score, option 4, full

merger scored 439/500 – 88%, and option 3, group structure (hybrid model – contractual JV and

committees in common) scored 355/500 – 71%:

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Figure 22: Weighted average score organisational form workshop 15 March 2017

Description

Weighted average score

Quality &

Sustainability Financial

Strategic

alignment Deliverability

Total

(scored out of

a possible 500)

Full merger via

acquisition 197 / 1

st

138 /1st

58 /1st

47 / 2ND 439 / 1st

Group structure via

Hybrid model 157 / 2

nd

105 / 2nd

51 / 2nd

42 / 3rd

355 / 2nd

Group structure via

committees in common 115 / 3

rd

95 / 3rd

45 / 3rd

42 / 3rd

297 / 3rd

Status Quo 67 / 4th

60 / 4th

45 / 3rd

52 / 1ST 223 / 4th

The detailed raw scores for each criteria are outlined in Appendix 20.

5.7 Support for closer collaboration

5.7.1 Commissioner support

The BHFT and DTHFT collaboration work has fed into both STPs and commissioners are supportive

both in principle and through engagement on the SCB of closer collaboration being explored. Formal

written support for the recommended option will be attached in Appendix 21 (pending outcome of

SCB and discussions with CCGs).

5.7.2 Regulator support

Our regulators support greater collaboration to address the underlying issues at both Trusts. While

recognising that it will not eliminate the financial deficit, the SOC and this OBC show that it will

improve finances at both Trusts and be an enabler to making services sustainable.

5.7.3 Trust support

The Boards of both Trusts have agreed a joint MOU setting out how they will work together to assess

the options to progress joint working. The first milestone being the completion of this Outline

Business Case by April 2017, if the recommendations of the final OBC are accepted at Board in June

2017, a FBC will be developed within 6 months to be transacted by April 2018.

5.8 Constraints and dependencies

The constraints and dependencies relating to any proposed collaboration are identified in Figure 23.

Constraints are externally imposed and must be identified and managed from the outset.

Dependencies are any actions of development required of others if the ultimate success of the

collaboration is dependent on them.

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Figure 23: Collaboration constraints and dependencies

Constraints Dependencies

Aim to maintain clinical services currently provided on each site

Available resources including expertise and finance to develop and implement the full business case

Sustain wider support of our key stakeholders including commissioners, regulators, staff and the wider public

Commissioner and Regulator support including NHS Improvement

Recognise that some staff will potentially be unable to move between sites to support service sustainability

Competition and Markets Authority approval

Support delivery of the wider sustainability and transformation plan being led by our commissioners

Implementation and integration team, and finances to develop and implement the preferred solution

Meet statutory and regulatory requirements placed on NHS organisations

Meet competition requirements

Continue to utilise PFI buildings

Deliver cost improvement within 2016/17 and significant financial benefits in 2017/18 and beyond

Proposals must be affordable

Payback on investment must be reasonable, e.g. within five years

5.8.1 Constraints

The collaboration must ensure that services which are currently provided at both Trusts are

supported and maintained. Under the NHS Act 200634, commissioners have a responsibility to

consult with the users of any service where there are proposals to change the way those services are

provided. There are some proposals in this business case that will require further development of

proposals with commissioners (e.g. Stroke), it is anticipated that consultation under the Act for this

service will be undertaken by commissioners.

As the hospitals provide a key public service, any changes may generate wide interest, hence any

proposals must be understood by and have the support of key stakeholders and regulators. Clinical

support is crucial to ensure successful delivery of any option. Therefore, there will be extensive

engagement with the public, stakeholders and staff.

With the financial challenges faced by the wider health economy, any collaboration must also

support the plans being developed by commissioners to effectively meet the anticipated demand

within available resources.

34

National Health Service Act 2006 Section 242(1B)

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Although our Trusts are directly involved in the sustainability and transformation plans for

Derbyshire and Staffordshire, any proposed collaboration must not impact negatively upon the

populations in those areas.

5.8.2 Dependencies

The success of the collaboration will be dependent on putting in place teams to develop and

implement a FBC. This will require external financial support.

A team will be required to develop the FBC, and then, if the FBC is approved, an implementation and

integration team will be required to deliver the preferred option.

Ongoing regulator and commissioner support for the collaboration is required throughout the

process.

If the collaboration could affect levels of choice for residents in the Staffordshire or Derbyshire

areas, any collaboration is dependent upon approval from the Competition and Markets Authority.

5.8.3 Other considerations – including STP alignment

The Staffordshire STP vision for its system architecture in the next 5 to 10 years is to develop an

accountable care organisation, and we believe the merged organisation would be part of this. The

Derbyshire STP vision includes developing modality placed based care models, similarly we believe

the merged organisation would be aligned to these. We will continue our ongoing dialogue with

both of our STPs to ensure alignment of our plans; they are key partnerships particularly in respect

to progressing vertical integration to support our patients with accessing care outside of hospital.

Conclusions:

Our joint Executive teams agreed a short list of four organisational form options (including status quo).

Following an appraisal of all four options based on the full clinical, operational and financial evidence base developed in the clinical and shared service workstreams, our preferred option is to consider further the option of merger under the next phase of the programme.

We recommend the Boards consider organisational form merger to be taken forward for further development in the FBC.

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6. The financial case

The Trusts are committed to improving services for our populations, and with this achieving the


The SOC identified potential financial benefits by 2021/22 of £17.6m p.a. as a single organisation,

risk adjusted to £10.1m p.a. to account for delivery risk.

Since then, in this OBC, further work has been carried out through a series of deep dives with both

clinical and shared service teams. We have consolidated our understanding of the financial benefits

since the SOC and have greater confidence of their delivery, such that this OBC has increased the

overall value of the merger financial benefits to £23.0m (risk adjusted) including:

Identified plans that will deliver £14.1m p.a. of financial benefits as a single organisation, £11.2m

p.a. risk adjusted to account for delivery risk, recurrently by 2021/22. 80% of savings are from

cost reduction, with the remainder reflecting additional contribution from repatriation / growth.

Plans to be developed for £11.8m from 2019/20 by 2021/22. This represents an additional 0.5%

reduction of operating expenditure. Further work will be undertaken for the Final Business Case

to develop these plans including exploring:

o Additional areas where best practice from one Trust can be adopted across both Trusts.

o Assessing the opportunities to deliver additional activity at a marginal rate – the current

assumption is that this will be delivered at full cost.

o Reviewing those areas where collaboration opportunities have not been identified yet.

The merger financial benefits are in addition to the CIPs and vacancy factors of both current

organisations (£103.8m over 5 years). Through merger the combined transformation team and

integration itself will better enable the delivery of the CIPs as well as the merger financial benefits.

By 2021/22, the deficit of the (risk-adjusted) merged Trust is forecast to be £20.1m. Assuming the

access to STF in 2021/22 is on the same basis as in 2018/19 then, the merged organisation would be

eligible for £18.1m which would reduce the deficit to circa £2m. The phasing of the merger savings

currently indicates that year 4 would be the first where the organisation is eligible for this STF.

In section 6.3 we have further explored external transitional funding for the PFI element of the

structural deficit. In the scenario the deficit could be reduced to a breakeven position by year 5 and

the Trust will also have been control total compliant and eligible for STF in all years post-merger.

This finance case outlines the financials for the preferred option, as well as the historical

performance of the standalone organisations, BHFT and DTHFT. This section of the OBC intends to

support the Boards to understand the outline financial implications (as identified at this stage) of

combining the two standalone Trusts into one single combined Trust. The sections following include:

The approach including key assumptions – section 6.1

The outline financials of the merged Trust – section 6.2

A scenario analysis for the merger considering transitional central funding for the PFI element of

DTHFT’s structural deficit – section 6.3

BHFTs / DTHFTs standalone historical finances - section 6.4 and 6.5 respectively

Sensitivity analysis around the collaboration opportunities – section 6.6

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6.1 Approach and key assumptions

The base case has been developed based on the following building blocks:

2015/16 information from statutory accounts


2017/18 and 2018/19 from the December 2016 operational plans submitted by each Trust to

NHSI and approved by Trust Boards updated for BHFT’s and DTHFT’s March 2017 re-submissions

and May 2017 amendments

2019/20, 2020/21 and 2021/22 were extrapolated from the 2018/19 position using the following

assumptions:

Figure 24: Key finance assumptions – base case

Key Assumptions – base case

Growth is delivered at 0% margin

Inflation creates a cost pressure of £1.43m in 2019/20, £1.81m in 2020/21 and £1.83m in 2021/22

STF allocations: o BHFT receive 2017/18 STF recurrently as a standalone Trust and DTHFT assumes no

STF from 2017/18 as a standalone Trust. o As a combined Trust, from April 2018 a eligibility threshold/compliance target for STF

has been estimated based on current criteria. The first year that the combined Trust is assumed to be compliant and eligible for STF is Year 4 post merger – 2020/21.

Depreciation funds capital replenishment from 19/20 - 21/22

All additional borrowing beyond 18/19 will accrue interest at 3.5%

Interest on cash support creates an additional cost pressure

Capital specifically related to the transaction has not been included at this stage

The Public Dividend Capital (PDC) dividend for BHFT will be saved if the Trusts merge in years 18/19 to 20/21 due to DTHFT's negative net relevant assets

Compound interest from the impact of interest charge increasing the deficit has not been included

Figure 25: Key forecast assumptions

2019/20 2020/21 2021/22

Acute activity growth 2.6% 2.5% 2.5%

Tariff inflator 2.2% 3.1% 3.1%

Tariff efficiency factor -2.0% -2.0% -2.0%

Pay & Pensions Assumptions 1.6% 2.9% 2.9%

Drugs Assumptions 4.1% 4.1% 4.1%

Procurement Assumptions 1.9% 2.0% 2.0%

Capital Assumptions 3.1% 3.1% 3.1%

Litigation Assumptions 5.0% 5.0% 5.0%

Provider Other Assumptions 1.9% 2.0% 2.0%

6.2 The merged Trust

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This section outlines details of the financial base for the merged Trust, including:

Summary statements and metrics of the combined organisations (section 6.2.1)

The merged Trust synergies (section 6.2.2)

Transaction costs (section 6.2.3)

Additional capital requirement (section 6.2.4)

CIPs and synergies combined (6.2.5)

Cash (section 6.2.6)

Delivery risk (section 6.2.7)

6.2.1 Summary statements and metrics of the combined organisations

From 2021/22 onwards, the deficit of the (risk-adjusted) merged Trust is forecast to be £20.1m

yearly before the receipt of STF. This is a significant improvement over the “Do minimum” scenario

of £37.5m. This £17.4m decrease in deficit is a predominately driven by merger benefits totalling

£23.0m (net of transaction costs). STF eligibility is anticipated to be in 2020/21 and 2021/22 when

the combined Trusts deficit reaches a level less than £29.9m, triggering a receipt of £18.1m STF

funding which further reduces the deficit to c£2.0m.

The forecast deficit is shown in the Figure 26 below. It has been prepared by combining the forecast

I&E of both Trusts using the assumptions in section 6.1 and adjusting for any consolidation

adjustments such as transaction synergies and associated transaction costs described further in the

sections following.

Figure 26:– Combined merged Trust forecast financial deficit summary

Merger £m 2017/18 2018/19 2019/20 2020/21 2021/22

DTHFT Do minimum -36.8 -28.1 -27.7 -27.4 -27.3

BHFT Do minimum -9.7 -7.6 -9.4 -9.8 -10.2

Baseline (do minimum) -46.5 -35.7 -37.1 -37.2 -37.5

Remove BHFT recurrent STF on merging -5.4 -5.6 -5.7 -5.8

Merger synergies/benefits:

Reduction in interest -0.1 2.4 2.0 1.4 0.6

Clinical opportunities (net of costs) 0.1 0.9 2.5 4.6 5.6

Shared service opportunities (net of costs) -1.8 1.4 4.0 4.7 5.0

Additional merger synergies (net of costs) 3.8 7.7 11.8

Merger synergies/benefits subtotal: -1.8 4.7 12.3 18.4 23.0

Merger base case deficit (before STF) -48.3 -36.4 -30.4 -24.5 -20.1

Add in STF when compliance target achieved 0 0 0 18.1 18.1

Merger base case deficit (after STF) -48.3 -36.4 -30.4 -6.4 -2.0

Source: Trusts finance model - Master consolidation model 30/03/17 and Trust estimates 25/05/17

The position could be further improved if the £15m PFI structural deficit were resolved through

refinancing or central support – modelling of this scenario is outlined in section 6.3.

77

The figure below details the merger scenario’s overall I&E forecast surplus / (deficit) position (this

has not been adjusted for intra-group cash flows under consolidation).

Figure 27: Combined Trust IE for merger


6.2.2 The merged Trust synergies

The merger financial benefits in the base case are £23.0m (risk adjusted) by 2021/22 including:

Financial benefits identified to date of £11.2m pa risk adjusted, including clinical synergies £5.6m

p.a., £5.0m p.a. for shared service synergies and interest saving of £0.6m. These figures have

been risk adjusted to be representative of deliverable financial benefits.

Plans to be developed for £11.8m across 3 years (2019/20 to 2021/22). This represents an

additional 0.5% reduction of operating expenditure.

The expected financial benefits have been phased as per the figure following.

Figure 28: Combined merged Trust synergies – by category

Synergies by category - £m 2017/18 2018/19 2019/20 2020/21 2021/22

Clinical 0.7 2.0 3.2 4.6 5.6

Clinical implementation costs -0.6 -1.1 -0.8 0.0 0.0

Shared services 0.3 2.9 4.2 4.7 5.0

Shared services implementation costs -2.1 -1.6 -0.2 0.0 0.0

Total clinical/ shared service benefits identified -1.7 2.3 6.5 9.3 10.6

Interest saved through synergies -0.1 2.4 2.0 1.4 0.6

Total identified synergies 1.0 7.4 9.4 10.6 11.2

Additional merger synergies - - 3.8 7.7 11.8

Total synergies (net of cost) in base case 1.0 7.4 13.2 18.3 23.0

Source: Trusts finance model - Master consolidation model 30/03/17 and Trust estimates 25/05/17.

2017/18 2018/19 2019/20 2020/21 2021/22

£'m £'m £'m £'m £'m

Operating income:

Total operating income 722.3 736.8 757.9 803.2 830.0

Operating expenses:

Employee expense 476.1 475.0 480.2 491.0 503.0

Non pay expense 220.5 223.0 228.6 235.1 241.0

PFI expense 39.0 40.0 41.3 42.5 43.8

Total operating expense 735.6 738.0 750.1 768.6 787.8

EBITDA -13.3 -1.2 7.8 34.6 42.2

EBITDA margin % -1.8% -0.2% 1.0% 4.3% 5.1%

Other operating expenses

Depreciation & amortisation 15.4 15.8 16.1 16.4 16.7

Non operating income -0.1 -0.1 -0.1 -0.1 -0.1

Non operating expenses 19.7 19.5 22.2 24.7 27.6

Surplus / (Deficit) after tax -48.3 -36.4 -30.4 -6.4 -2.0

78

At SOC stage the value for clinical services was based on a small number of deep dives which were

then grouped, extrapolated to include other specialities and risk adjusted by 50% to give a value of

£5.6m. For the OBC this process has been further refined to include a greater breadth of deep dive

areas, benchmarked productivity opportunities (using nationally available data) and merger specific

clinical synergies i.e. rationalising on call. Each of these was then risk adjusted on a line by line basis

to reflect the level of development of the opportunities.

At SOC stage the risk adjusted value of financial benefits for shared services in a merger scenario was

£4.6m, this has increased to £5.0m following further analysis. In a number of areas high level heavily

risk adjusted figures have been replaced by values developed through bottom up costings which

require a lower level of risk adjustment.

The figure below shows the breakdown of opportunities identified in merger between cost

reductions; contribution from repatriating private provider work, contribution from repatriation

from NHS providers / growth, investment in services, and the reduced interest liability (these are

adjusted for risk and exclude implementation costs).

The majority of synergies identified through a merger between the two trusts are as a result of

reducing the cost base (80%). The remaining costs are through increased contribution and

investment in services. Furthermore, the additional merger synergies are all at this stage assumed to

be reductions to the cost base.

Figure 29: Breakdown of merged Trust synergies - by type

Synergies by type - £m 2017/18 2018/19 2019/20 2020/21 2021/22

Cost reduction 0.3 3.8 5.9 7.2 8.2

Contribution from repatriation from private providers

0.1 0.1 0.4 0.6 0.6

Contribution from repatriation from NHS providers and growth

0.6 1.0 1.2 1.5 1.8

Interest saved through synergies -0.1 2.4 2.0 1.4 0.6

Total identified synergies 1.0 7.4 9.4 10.6 11.2

Additional merger synergies - - 3.8 7.7 11.8

Total synergies (net of cost) in base case 1.0 7.4 13.2 18.3 23.0


79

The detailed breakdown for clinical synergies are included in the figure below:

Figure 30: Detailed breakdown of merged Trust clinical synergies

Merger synergies £m risk adjusted values

Opportunity type Description Risk

adjustment 17/18 18/19 19/20 20/21 21/22

Deep dive Oncology 90% 0.0 0.0 0.0 0.0 0.0

Deep dive Orthopaedic 90% 0.1 0.1 0.4 0.6 0.6

Deep dive Cardiology 90% 0.5 0.5 0.5 0.6 0.6

Deep dive Radiology 90% 0.0 0.1 0.1 0.1 0.1

Deep dive Endoscopy 90% 0.1 0.2 0.3 0.5 0.6

Deep dive Breast Screening 90% 0.0 0.0 0.0 0.0 0.0

Deep dive Acute Med / A&E 90% 0.0 0.0 0.0 0.0 0.0

Functional Productivity LOS 50% 0.0 0.5 1.0 1.5 2.0

Functional Productivity DNA 50% 0.0 0.1 0.1 0.1 0.2

Functional Productivity Day case 50% 0.0 0.2 0.3 0.4 0.5

Collaboration Opportunities Reduction in on call payments for single team

90% 0.0 0.1 0.1 0.2 0.2

Collaboration Opportunities WLI premium 25% reduction - DTHFT 100% 0.0 0.2 0.4 0.6 0.8

Collaboration Opportunities WLI premium 25% reduction - BHFT 100% 0.0 0.0 0.0 0.0 0.0

Speciality specific Renal 100% 0.0 -0.0 -0.0 -0.0 -0.0

Total 0.7 2.0 3.2 4.6 5.6

Source: Trusts finance model - Master consolidation model 30/03/17

The figure above reflects the outputs of the clinically led deep dives, a high level benchmarking exercise and specific opportunities identified by the trusts that would be deliverable through merger of the trusts. Risk adjustments were applied to these to reflect the level of planning to support each area.

80

Figure 31: Detailed breakdown of merged Trust shared services synergies

The detailed breakdown for shared service synergies are included in the figure below:

Merger synergies £m risk adjusted values

Area Risk adjustment 17/18 18/19 19/20 20/21 21/22

Finance 80% 0.00 0.14 0.32 0.50 0.50

Audit 100% 0.00 0.00 0.09 0.09 0.09

Transformation / PMO 80% 0.00 0.19 0.19 0.19 0.19

Procurement 75% 0.00 0.09 0.09 0.09 0.09

Non pay 100% 0.10 0.20 0.30 0.40 0.50

Subscriptions 90% 0.00 0.13 0.13 0.13 0.13

Information 80% 0.00 0.00 0.00 0.21 0.21

IT 70% 0.00 0.00 0.09 0.09 0.09

Communications 80% 0.00 0.06 0.06 0.06 0.06

Pharmacy Management 0.00 0.00 0.00 0.00 0.00

Operations 90% 0.00 0.23 0.46 0.46 0.46

Board 100% 0.00 0.51 1.02 1.02 1.02

HR 90% 0.19 0.51 0.51 0.51 0.51

Medical Records 80% 0.00 0.03 0.09 0.09 0.09

Pathology 75% 0.00 0.00 0.00 0.00 0.20

Estates 100% 0.00 0.07 0.07 0.07 0.07

Facilities and Medical Electronics 100% 0.00 0.20 0.20 0.20 0.20

Governance 75% 0.00 0.22 0.22 0.22 0.22

Corporate Nursing 80% 0.00 0.19 0.19 0.19 0.19

Corporate Medical 80% 0.00 0.16 0.16 0.16 0.16

0.29 2.95 4.21 4.70 4.99

Source: Trusts finance model - Master consolidation model 30/03/17. The figure above reflects savings agreed with the SRO for each area based on detailed

modelling of new operational structures and opportunities presented by the merger. The majority of synergies identified through a merger between the

two trusts are as a result of reducing the cost base (80%). The remaining costs are through increased contribution and investment in services.

81

6.2.3 Transaction costs

Transaction and transition costs, included in the financial model, are summarised in the figure below

and amount to £6.3m across 2017/18 to 2019/20.

6.2.3.1 Outline summary transaction and transition costs

Transition costs for the merger between DTHFT and BHFT total £6.3m; comprising £1.0m

redundancy, £2.2m project delivery team, £0.6m IT integration costs (interface solution as an

interim measure, rather than a new patient administration system) and £1.0m external costs

(comprising CMA/competition, legal and due diligence costs) and £1.7 m for clinical implementation

costs. These costs are expected to be incurred over three years and have been phased as £2.7m

(Yr1), £2.6m (Yr2) and £1.0m (Yr3). Further work on the detail of the implementation will be

undertaken should we proceed to FBC and that will improve the accuracy of these initial

assumptions.35

Figure 32: Outline summary transaction and transition costs

Area £m

2017/18 2018/19 2019/20 2020/21 2021/22 Total Non recurrent cost over 5 years

Project delivery team -1.0 -0.8 -0.4 0.0 0.0 -2.2

Clinical implementation

-0.3 -0.8 -0.6 0.0 0.0 -1.7

External costs -1.0 0.0 0.0 0.0 0.0 -1.0

Redundancy -0.2 -0.7 0.0 0.0 0.0 -1.0

IT integration -0.3 -0.3 0.0 0.0 0.0 -0.6

Total -2.7 -2.6 -1.0 0.0 0.0 -6.336


6.2.3.2 Outline funding source assumptions for transaction and transition costs

We are pursuing discussions in relation to external funding for these costs, however given ongoing

discussions, the assumption modelled into the financial base case is that no revenue/funding stream

is received to offset these costs in any year in the base case.

However, the next stage of work will require up to £1.5m for the 6 months of costs associated with

FBC delivery by the end of October 2017. The Boards should consider whether to self-fund the FBC


further pursue external funding, however if this is not secured until June 2017, there will be a risk to

delivery of FBC in October 2017.

A further request for external funding will also be made for the transitional costs which occur after

November 2017 amounting to c£4.8m.

35

Rounding of figures to nearest million – total as per table of £6.3million 36

Rounding of figures to nearest million – total as per table of £6.3million

82

6.2.4 Additional capital requirement

Early analysis of the capital requirements for the clinical models have been explored during the OBC

phase through initial discussions, however at this stage no capital requirements have been included

within the financial modelling as further work is required to assess the overall level of capital spend

that would need to be incurred. This will be refined at the FBC stage as further development of the

models and space are developed.

6.2.5 CIPs and synergies combined

The combined Trust forecasts to deliver CIPs totalling £103.8m over the five years. This is an average

CIP delivery of about £18m pa from 2018/19. In addition to the core CIP delivery, the Trusts will

deliver £23.0m recurrently by 2021/22 (excluding the reduction in interest costs).

Figure 33: CIPs individual organisations

In year - CIP stand alone £m 2017/18 2018/19 2019/20 2020/21 2021/22

BHFT in year CIP £m -9.5 -7.6 -3.5 -3.6 -3.7

CIP as % of operating expense -4.7% -3.8% -1.7% -1.7% -1.7%

DTHFT in year CIP £m -24.0 -12.0 -13.0 -13.2 -13.6


CIP (BHFT + DHFT) stand alone -33.5 -19.6 -16.5 -16.8 -17.3

Source: Trust CIP plans

Figure 34: CIPs and synergies - combined organisation

CIP (cumulative) £m 2017/18 2018/19 2019/20 2020/21 2021/22

CIP BHFT and DTHFT (cumulative) -33.5 -53.1 -69.6 -86.5 -103.8

Combined synergies £m (cumulative) (Excl. implementation costs)

-1.0 -7.4 -13.2 -18.3 -23.0

CIP + transaction synergies £m -34.5 -60.5 -82.8 -104.8 -126.8

CIP + transaction synergies as a % of operating expense

-4.6% -8.0% -10.7% -13.1% -15.3%


6.2.6 Cash

The forecast cash position has been estimated based on existing working capital support increasing

by the forecast I&E deficits and additional repayments associated with PFI, Medical Equipment

Services (MES) and prior loans. The figure below shows that even under a merged organisation the

combined Trust will still require £191m more cash support than in 2016/17 (from £387m in 2016/17

to £578m in 2021/22). This includes the receipt of STF in years 4 and 5.

83

Figure 35: Combined forecast cash facility


6.2.7 Delivery risk

There are inherent risks in the calculations regarding the estimated financial benefits and

implementation costs that would exist in any financial forecast. The most significant of these are:

i. The do minimum model includes STF receipt of £5.4m in BHFT for the duration of the model

(over the 5 years). There are significant risks to realising this if the combined organisational

control total under a merged structure is calculated through a similar methodology as

currently. Therefore the “BHFT” STF is only included in the base case in 2017/18 as this is

prior to merger. In future years, all STF is removed until the combined organisation is

compliant.

ii. CIP – Despite both having reference cost indices in the low 90%s the base case model

assumes delivery by the two Trusts of £103.8m of recurrent CIP savings over the five year

period. So far plans have only been developed for 2017/18 therefore there are risks around

the overall deliverability of these savings.

iii. Scope of clinical redesign – At OBC stage a limited number of clinical areas were explored to

develop more detailed plans under an integration scenario. Due to a number of areas not

being covered in these reviews a complete clinical model could not be completed at this

stage and risks remain around the deliverability of the whole clinical model.

iv. Clinical (functional productivity financial benefits/synergies) - To identify further

opportunities in clinical areas some high level benchmarking has been performed using the

“Better care better values” portal. These benchmarks contain high level assumptions and are

based on a limited time period and wide group of comparative Trusts.

v. Implementation Costs – We have undertaken a bottom up costing exercise in relation to

staffing costs associated with implementation costs. For external costs associated with the

merger, we have used available benchmarked information on integration costs from other

transactions. Although with the knowledge that every separate Trust is entirely different, the

circumstance for merger is different and local and national NHS environments are always

changing, the assumption that costs may be similar is a risk. IT integration costs in particular

are the most significant risk. A more detailed analysis will need to be done as part of the

Forecast cash facility £m 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Burton Cash Requirement:

Do minimum

Derby Cash Requirement:

Do minimum

Combined cash position:

Do minimum

Combined cash position:

Merged entity

-556.7

-39.0 -48.7 -56.2 -65.5 -75.1 -85.1

-348.0 -398.3 -455.9 -491.1 -524.7

-577.6

-387.0 -447.0 -512.1 -556.6 -599.8 -641.8

-387.0 -448.7 -516.9 -556.6 -570.4

84

FBC and this will differentiate between necessary IT investment and the extra IT investment

to facilitate merger.

vi. Risk of double count – Both Trusts have attempted to reconcile financial benefits back to CIP

plans and STP assumptions however, due to the level of completeness for future years there

is a risk this has not fully accounted for overlaps.

vii. STP – As BHFT is within the Staffordshire STP and DTHFT sits with Derbyshire STP there is a

risk of incompatibility between the two footprints plans although there is ongoing work by

both Trusts to ensure alignment.

viii. Due diligence has not been undertaken on any figures in this OBC, any figures that have

been estimated or forecast are representations made by each Trust with information

available to them at the time of writing this OBC.

ix. We have not used the Long Term Financial Model (to present our Income and Expenditure,

Balance Sheet and Cash statements as per Transaction guidance best practice due to time

constraints). We have developed our own consolidation model for combining the forecasts

as a merged entity and presenting them in this OBC. This model is yet to be audited. LTFMs

will be produced for the FBC.

x. The model includes activity growth assumptions and increased costs of delivery. This has

increased both pay and non pay over the period of the model. The CIP requirement

effectively removes this growth in costs by assuming greater levels of efficiency and

productivity. If activity is constrained and the workforce is not required to increase to deliver

it, then the efficiency still required will mean a significant impact on the cost base, of which

workforce remains the largest component.

85

6.3 Scenario analysis

The financial case considered within the OBC is based on a number of key assumptions which will be

reassessed and further tested during the FBC process. Within this section we explore the impact of

transitional income being made available for the PFI element of DTHFT’s structural deficit. Funding

being made available for the PFI element of DTHFT’s structural deficit was excluded from the base

financial case as it is not within the control of the Trusts.

The assumption modelled in this scenario is that the combined Trust receives transitional support to

address the structural deficit caused by the PFI starting at £15m in 2017/18 and tapering to zero

over the 5 year period as per the table below.

Figure 36: Transitional Support assumption for scenario analysis

£m 2017/18 2018/19 2019/20 2020/21 2021/22

Tapered PFI transitional support assumption £15.0 £12.0 £8.0 £4.0 £0.0

Source: Trust scenario assumption

Considering the above assumption (i.e. the receipt of transitional structural support), results in the

combined Trust being eligible for STF based on current compliance rules in all of the 5 years –

2017/18 to 2021/22. This would also reduce the cash requirement by £93m. Without the transitional

support, the combined trust would only be eligible for STF in years 4 and 5. The impact on the deficit

in this scenario is outlined below.

Figure 37: Bridge/breakdown of financials for scenario analysis

Merger scenario analysis 2017/18

2018/19

2019/20

2020/21

2021/22

£'m £'m £'m £'m £'m

Do minimum

DTHFT Do minimum -36.8 -28.1 -27.7 -27.4 -27.3

BHFT Do minimum -9.7 -7.6 -9.4 -9.8 -10.2

Baseline (do minimum) -46.5 -35.7 -37.1 -37.2 -37.5

Base case

Remove BHFT recurrent STF on merging -5.4 -5.6 -5.7 -5.8

Merger synergies/benefits (net of costs) -1.8 4.7 12.3 18.4 23.0

Add in STF when compliant 0 0 0 18.1 18.1

Merger base case deficit (including STF) -48.3 -36.4 -30.4 -6.4 -2.0

Changes with PFI support scenario

External PFI income support 15.0 12.0 8.0 4.0 0.0

Additional interest benefit 0.3 0.7 0.9 1.3 2.1

Additional STF compliance in first 3 years (on top of last 2 years in basecase) 12.7 18.1 18.1 0 0

PFI support scenario net surplus/(deficit) including STF -20.3 -5.6 -3.4 -1.1 0.0


86

The graph below outlines the combined trust I&E deficit for the period under each of the scenarios:

(1) do minimum standalone, (2) OBC base case and STF eligibility in years 4 and 5 only, and (3) PFI

support scenario.

Figure 38: Combined entity analysis

In summary, the standalone positions of the two Trusts remain in significant deficit positions,

whereas the merger opportunities described in the base case result in a £2m deficit by year 5 which

is a significant improvement. However, this still relies on receipt of STF which only becomes available

in years 4 and 5, if the existing criteria remain. This means that the combined organisation still has

significant cash problems, has no STF receipts in the early years and has restricted, or no access to

capital due to failure to achieve the set control total. Under the scenario, the position improves

significantly due to the receipt of tapered transitional support which also allows the organisation to

access STF for all 5 years of the plan and achieve financial balance by 2021/22.

87

6.4 BHFTs standalone position

This section reviews the financial position of the Trust in a ‘Do minimum’ scenario and provides

useful information on the historical and forecast position.

6.4.1 Historical trading

The figure below shows a summary of BHFT’s historical trading for the last three years.

Figure 39: Historical trading I&E BHFT

Source: Trusts finance model - Master consolidation model 30/03/17 and 16/17 accounts

2014/15 2015/16 2016/17

Operating income:

Clinical income £m 162.2 163.1 167.3

Non clinical income £m 21.0 20.0 21.6

STF Fund 7.5

Total operating income £m 183.2 183.1 196.4

Operating expenses: £m

Employee expense £m -123.0 -127.7 -131.1

Non pay expense £m -60.6 -62.2 -64.3

PFI/LIFT expense £m

Total operating expense £m -183.7 -190.0 -195.4

EBITDA £m -0.5 -6.9 1.0

EBITDA margin % % -0.26% -3.77% 0.51%

Other operating expenses £m

Depreciation & amortisation -6.4 -5.8 -6.1

Impairments/disposals -0.2 -1.0 -0.3

Non operating income £m 0.1 0.3 0.1

Non operating expenses £m -3.7 -3.9 -2.9

Total non operating expenses -10.1 -10.4 -9.2

Surplus / (Deficit) after tax £m -10.6 -17.3 -8.2

STF, impairment reversal, cap to -0.2 -1.1 7.4

Surplus / Deficit -10.4 -16.2 -15.6

88

6.4.2 Annual plan forecast

The forecast plan (Figure 43) below is derived from:




NHSI and approved by Trust Boards updated to reflect the March submission

2019/20, 2020/21 and 2021/22 were extrapolated from 2018/19 based on the assumptions

outlined in section 6.1

The inflation assumptions applied for both Trusts are based upon NHS Improvement published

assumptions

Investments required in sustainability over and above FPR plans have also been included

To reduce the deficit further, the collaboration work suggests more financial benefits/synergies

can be achieved and this is demonstrated in the combined Trust position.

The improved position from 17/18 to 18/19 is due predominantly to CIP being greater than the tariff

efficiency. From 19/20 onwards the deterioration is due to the impact of inflation.

Figure 40: Annual Plan Forecast I&E BHFT

2017/18 2018/19 2019/20 2020/21 2021/22

Operating income:

CCG, NHSE and Other Internal (HEE, S7, LA, BCF)

£m 194.2 195.7 200.7 207.3 214.1

External clinical and non clinical income

£m 1.2 1.2 1.2 1.2 1.2

Total operating income £m 195.4 196.9 201.9 208.5 215.3


Employee expense £m 130.3 128.9 133.3 137.7 142.4

Non pay expense £m 65.0 65.8 68.0 70.2 72.6

PFI expense £m

Total operating expense £m 195.4 194.7 201.2 208.0 214.9

EBITDA £m 0.0 2.2 0.7 0.5 0.4

EBITDA margin % % 0% 1% 0% 0% 0%


Depreciation & amortisation £m 6.3 6.4 6.5 6.6 6.8

Non operating income £m -0.0 -0.0 -0.0 -0.0 -0.0

Non operating expenses £m 3.4 3.5 3.6 3.7 3.8

Surplus / (Deficit) after tax £m -9.7 -7.6 -9.4 -9.8 -10.2


89

6.4.3 Historical and forecast cost improvement plans

BHFT has a strong history of CIP delivery from 2014/15 to 2016/17 as evidenced by its low reference

cost index.

The Trust is actively using information from the review by Lord Carter of Coles and BCBV in assessing

the opportunities available, and is already working collaboratively with DTHFT in areas such as

procurement to achieve these improvements.

Figure 41: Historical CIP BHFT

Source: BHFTs CIP

Figure 42: Forecast CIP BHFT

CIP 2017/18 2018/19 2019/20 2020/21 2021/22

BHFT in year CIP £m 9.5 7.6 3.5 3.6 3.7

CIP as % of operating expense

4.7% 3.8% 1.7% 1.7% 1.7%

Source: BHFTs CIP

2014/15 2015/16 2016/17

CIP target £m 4.8 5.6 7.3

CIP actual £m 4.8 5.6 7.4

CIP actual (recurrent) £m 4.8 5.2 7.4

CIP actual (recurrent) % % 100.0% 92.5% 100.0%

90

6.5 DTHFTs standalone position

This section reviews the financial position of the Trust in a ‘do minimum’ scenario and provides

useful information on the historical and forecast position.

6.5.1 Historical trading

The Figure below shows a summary of DTHFT’s historical trading for the last three years.

Figure 43: Historical trading I&E DTHFT

Source: DTHFT Trust financials and 16/17 accounts

*£29.3m includes a £3.7m non-recurrent capital to revenue transfer.

2014/15 2015/16 2016/17

Operating income:

Clinical income £m 424.2 442.9 466.5

Non clinical income £m 53.4 51.9 56.6

STF Fund 14.3

Total operating income £m 477.6 494.8 537.4

Operating expenses:

Employee expense £m -310.0 -323.3 -338.7

Non pay expense £m -132.6 -136.6 -149.8

PFI/LIFT expense £m -32.5 -36.7 -38.4

Total operating expense £m -475.0 -496.6 -526.9

EBITDA £m 2.6 -1.8 10.5

EBITDA margin % % 0.55% -0.36% 1.95%


Depreciation & amortisation -10.5 -9.6 -7.5

Impairments/disposals -37.8 9.0 -2.0

Non operating income £m 0.8 0.8 1.0

Other operating expenses £m -14.2 -14.6 -14.3

Total non operating expenses -61.7 -14.4 -22.9

Surplus / (Deficit) after tax £m -59.1 -16.2 -12.4

STF, impairment reversal, cap to

rev-37.8 13.2 13.0

Normalised surplus / Deficit -21.2 -29.3 -25.4

Structural Deficit -18.7 -18.7 -20.0

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6.5.2 Annual plan forecast

The forecast plan is derived from:




NHSI and approved by Trust Boards updated for the March submission and May 2017

amendments.

2019/20, 2020/21 and 2021/22 were extrapolated from 2018/19 based on the assumptions

outlined in section 6.1.

The inflation assumptions applied for both Trusts are based upon NHS Improvement published

assumptions.

To reduce the deficit further, the collaboration work suggests more financial benefits/synergies

can be achieved and this is demonstrated in the combined Trust position.

The improved position from 17/18 to 18/19 is due predominantly to CIP being greater than the tariff

efficiency and income projections based on increased growth (as agreed with the CCG). From 19/20

onwards the deterioration is due to the impact of inflation and additional interest charges on the

growing level of cash support.

A main driver of the interest charge at Derby is the cumulative cash support to fund the estimated

£20m structural deficit and the interest element of the PFI charge. 37 See table below for DTHFT

forecast interest payments.

Figure 44: DTHFT forecast interest payments

DTHFT interest payments £’000’s 2016/17 Forecast

2017/18 Forecast

2018/19 Forecast

2019/20 Forecast

2020/21 Forecast

2021/22 Forecast

Interest on existing capital DOH capital loan

113 65 25

Interest on existing DOH revenue support loans

542 542 542 542 542 542

Interest on Department of Health Revolving working capital facility

836 2,022 4,763 6,110 7,480 8,899

Interest on additional capital loans

295 590 885

Total interest on borrowing (including capital)

1,491 2,629 5,330 6,947 8,612 10,326

PFI and MES interest 13,917 13,734 13,455 13,455 13,455 13,455

Total interest charges 15,408 16,363 18,785 20,402 22,067 23,781

Source: DTHFT

37

DTHFT Finance team narrative

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Figure 45: Annual Plan Forecast I&E DTHFT

Source: DTHFT Trust financials

6.5.3 Historical and forecast cost improvement plans

DTHFT has a strong history of CIP delivery from 2014/15 to 2016/17 as evidenced by its low

reference cost index.

The Trust is actively using information from the review by Lord Carter of Coles and BCBV in assessing

the opportunities available, and is already working collaboratively with BHFT in areas such as

procurement to achieve these improvements.

Figure 46: Historical CIP DTHFT

2014/15 2015/16 2016/17

CIP target £m 11.9 11.5 15.0

CIP actual £m 11.6 12.8 15.0

CIP actual (recurrent) £m 9.7 10.8 8.0

CIP actual (recurrent) % % 83.8% 84.6% 53.3%

Source: DTHFT CIP

Although 2016/17 has seen a higher level of non-recurrent vacancy slippage, the plan for 2017/18

assumes that this will be repeated in addition to the new £12m CIP target.

2017/18 2018/19 2019/20 2020/21 2021/22

£'m £'m £'m £'m £'m

Operating income:

Clinical income £m 520.1 534.3 548.2 566.5 585.5

Non clinical income £m 3.3 3.5 3.5 3.5 3.5

Total operating income £m 523.4 537.8 551.7 570.0 589.0


Employee expense £m 342.4 344.1 349.6 359.6 369.9

Non pay expense £m 153.5 154.1 158.6 163.3 168.2

PFI expense £m 39.0 40.0 41.3 42.5 43.8

Total operating expense £m 534.9 538.2 549.5 565.4 581.9

EBITDA £m -11.5 -0.4 2.2 4.6 7.1

EBITDA margin % % 0.0 0.0 0.0 0.0 0.0


Depreciation & amortisation £m 9.1 9.4 9.6 9.8 10.0

Non operating income £m -0.1 -0.1 -0.1 0.0 0.0

Non operating expenses £m 16.3 18.4 20.4 22.2 24.4

Surplus / (Deficit) after tax £m -36.8 -28.1 -27.7 -27.4 -27.3

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Figure 47: Forecast CIP DTHFT

Source: DTHFT CIP

6.6 Sensitivity analysis around the collaboration opportunities

Both clinical and shared service opportunity have been risk adjusted at speciality / departmental

level to take into account the level of detail and robustness of plans produced to date. Conclusions:

The Trusts are committed to improving services for our populations, and with this achieving the


The SOC identified potential financial benefits by 2021/22 of £17.6m p.a. as a single

organisation, risk adjusted to £10.1m p.a. to account for delivery risk.

Since then, in this OBC, further work has been carried out through a series of deep dives with

both clinical and shared service teams. We have consolidated our understanding of the financial

benefits since the SOC and have greater confidence of their delivery, such that this OBC has

increased the overall value of the merger financial benefits to £23.0m (risk adjusted) including:

Identified plans that will deliver £14.1m p.a. risk adjusted to £11.2m p.a. to account for

delivery risk by 2021/22. 80% of these savings are from cost reduction with the

remaining balance reflecting additional contribution from repatriation / growth.

Plans to be developed for £11.8m from 2019/20 to 2021/22. This represents an

additional 0.5% reduction of operating expenditure. Further work will be undertaken for

the FBC to develop these plans including exploring:

o Additional areas where best practice from one Trust can be adopted across both

Trusts.

o Assessing the opportunities to deliver additional activity at a marginal rate – the

current assumption is that this will be delivered at full cost.

o Reviewing those areas where collaboration opportunities have not been identified

yet.

By 2021/22, the deficit of the (risk-adjusted) merged Trust is forecast to be £20.1m. Assuming

the access to Sustainability & Transformation Funding (STF) in 2021/22 is on the same basis as in

2018/19 then, the merged organisation would be eligible for £18.1m which would reduce the

deficit to circa £2m. The phasing of the merger savings currently indicates that year 4 would be

the first where the organisation is eligible for this STF.

CIP (Excluding Merger Benefits) 2017/18 2018/19 2019/20 2020/21 2021/22

£'m £'m £'m £'m £'m

DTHFT in year CIP -24.0 -12.0 -13.0 -13.2 -13.6


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The merger financial benefits are in addition to the Cost Improvement Plans (CIP) of both

current organisations (recurrently £103.8m over 5 years within the base case). Through merger

the combined transformation team and integration itself will better enable the delivery of the

baseline CIPs as well as the merger financial benefits. Cumulatively by 2021/22 this equates to

15.3% combined CIPs and synergy efficiency from the merger.

The forecast cash position has been estimated based on existing working capital support

increasing by the forecast I&E deficits and additional repayments associated with the Private

Finance Initiative, Managed Equipment Services and prior loans. It is estimated that even under

a merged Trust the combined Trust require £191m more cash support than in 2016/17 (from

£387m in 2016/17 to £578m in 2021/22). This includes the receipt of STF in years 4 and 5.

We have further explored modelling a scenario of external transitional funding for the PFI

element of the structural deficit. In the scenario the deficit could be reduced to a breakeven

position by year 5 and the organisation will also have been control total compliant and eligible

for STF in all years post-merger.

In addition to exploring further opportunities in the FBC stage for collaboration we are committed to the principle that in developing the FBC we will seek to identify savings which show the deficit improving or at least not getting worse irrespective of the resolution of the structural deficit issue. To this end we would recommend that in the FBC, the base case is developed.

In summary, the standalone positions of the two Trusts remain in significant deficit positions, whereas the merger opportunities described in the base case result in a £2m deficit by year 5 which is a significant improvement. However, this still relies on receipt of STF which only becomes available in years 4 and 5, if the existing criteria remain. This means that the combined organisation still has significant cash problems, has no STF receipts in the early years and has restricted, or no access to capital due to failure to achieve the set control total. Under the scenario modelled, the position improves significantly due to the receipt of tapered transitional support which also allows the organisation to access STF for all 5 years of the plan and achieve financial balance by 2021/22.

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7. Organisational design

This section outlines further detail on the proposed organisational form, and proposes the outline

legal process to combine our two separate legal entities into one enlarged Trust. This section of the

OBC intends to support the Boards to understand the outline proposal of the preferred

organisational form in more detail including:

The recommended legal route to the proposed organisational form – section 7.1

The proposed organisational design for the enlarged Trusts Board of Directors – section 7.2

The proposed outline organisational design for the enlarged Trust’s divisions and performance

management – section 7.3 and section 7.4

The outline workforce strategy and workforce implications for the proposed merged entity –

section 7,5

Combining two legal entities is anticipated to require a large scale change programme of some three

to five years as such this section also outlines areas of focus for the organisational development and

workforce planning which will be further developed during FBC – section 7.5.

7.5 Recommended legal route to proposed organisational form

The three possible routes considered for combining the two entities into a single legal entity

include:

Route 1. Merger (dissolution of both Trusts, and the formation of a new NHS Trust)

Route 2. Merger via acquisition of DTHFT by BHFT (organisation is an NHS Foundation Trust)

Route 3. Merger via acquisition of BHFT by DTHFT (organisation is an NHS Foundation Trust)

All three scenarios have been considered for relative advantages and disadvantages taking into

consideration examples of previous NHS transactions nationally and specialist advice from legal

advisors and discussions with regulators, including factors outlined below:

There is no precedent in the NHS for a legal merger of two FTs (this scenario this would involve

dissolving two Foundation Trusts, and transferring all of the business and assets of both Trusts

into a new Trust, which would be an NHS Trust). As such the possibility of route 1 is impractical –

both timely and costly for the taxpayer and would result in the loss of FT status (impacting on

the population served)

The benefits of the acquisition route include that the combined organisation would retain FT

status via a legal acquisition route

DTHFT’s CQC rating is ‘good’ whilst BHFT’s is currently ‘requires improvement’

DTHFT’s ‘teaching’ status would extend across both hospitals under the scenario of DTHFT as the

legal acquirer

BHFT’s size (and lack of PFI relative to DTHFT) make it more practical (and lower cost) as the

smaller Trust to legally transfer assets, employees, properties, licences and key contracts to

DTHFT as the legal acquirer

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If the larger Trust were to acquire, the constituencies will require less adjustment post-

acquisition which means there will be less disruption to the Council of Governors.

We therefore recommend that it is more simple and cost effective for DTHFT as the larger Trust to

be the acquiring Trust. In terms of proposed process, the two organisations would undertake a

merger via acquisition taking the best of both organisations. This would only relate to the

transaction and transfer of assets and liabilities. In all other ways, the collaboration will be

approached as a merger between two equal partners, effectively forming a new organisation as a

result. We are committed to pursuing a true partnership of equals between the two Trusts.

The legal process for implementing the merger by acquisition would involve preparation of a new

constitution for the enlarged merged entity and preparation of a business transfer agreement,

pursuant to which all of the business, assets, liabilities and employees would be transferred to the

acquiring Trust. Arrangements will be made prior to the transaction completing to appoint a new

Board for the merged organisation (including NEDs, Chair and Executive Directors) from the pool of

existing post holders across the two Trusts.

Both Trusts make a joint statutory application to NHS Improvement following a vote by the Council

of Governors of both Trusts. NHS Improvement grants the statutory application with an appropriate

completion date. On completion, the acquiring Trust will continue to exist and will take over all

assets, liabilities and employees of the acquired Trust. The acquired Trust, (including its Board of

directors and Council of Governors) will be dissolved and the new constitution of the enlarged

merged Trust will take effect.

As part of its new constitution, the enlarged merged Trust will need to amend its public constituency

areas to ensure its membership is representative of the people to whom it provides services.

Elections will need to be held after completion of the merger for any new elected staff and public

governors of the merged Trust.

In summary, we recommend that an acquisition of BHFT by DTHFT is the most appropriate legal

route open to us to form a combined Trust.

7.6 Proposal for a new name for the combined entity

We recommend that during the FBC phase a proposal be developed for a new name for the

combined organisation. Our intention is to develop a name that reflects the wider population

developed with our stakeholders as we go through the next phases of the collaboration work.

7.7 Outline future board arrangements and emerging structure

Our Trust Boards have a number of statutory duties, they include:

Setting the strategic direction of the trust

Ensuring the care delivered to patients is safe and of high quality

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Ensuring value for money for the tax payer and that all public money is spent wisely and

effectively to improve care for patients

Ensuring services are accessible and responsive

Managing significant risks to the organisation, its staff and the patients and public who visit it.

Our Trust Boards receive assurances on these responsibilities through a variety of Board sub-

committees and reports, and through proactive and direct engagement with the operational

divisions, the services they provide and the patients they treat.

Figure 7 overleaf shows the proposed governance structure with both statutory and non-statutory

meetings of a Foundation Trust Board that will enable it to achieve the duties as set out above. Final

arrangements however would be confirmed by the newly appointed Board members.

The wider governance system will provide assurance that the standards and obligations set for the

Trust are met as a minimum, and that organisational, clinical and financial control systems are in

place and operating effectively. The output from the governance systems and reporting will provide

a valuable and independent quality assurance for the performance management systems and

reporting.

Figure 48: Proposed governance meeting structure following merger

Nominations &

Remuneration Committee

Charitable Funds

Committee

Audit Committee

Council of

Governors

Board of Directors

Trust Management

Group

Appointments Committee

Annual Members Meeting

Finance, Investment &

Performance Committee

People Committee

Quality Committee

Strategy & Delivery Groups

• Quality

• Workforce, Education & OD

• Transformation

• Operational Performance Groups

• Cancer

• RTT

• Urgent Care

• Burton Site Leadership Team

• IM&T

• Risk & Compliance

• Estates, Equipment & Capital Planning

• Strategy & Partnerships

• R&D

Clinical Divisions

Medicine (including

Cancer)

Surgery

Women’s & Children’s

Cancer & Clinical

Support

Statutory

Assurance

Delivery

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7.8 Outline operating structure of the proposed combined entity

The proposed operational arrangements seek to maximise the integration of both clinical and shared

services across the full spectrum of the new organisation’s operation. It is proposed that there will

be unified corporate departments e.g. Finance, Human Resources, Procurement etc. serving the

whole organisation. In addition it is proposed that clinical services will be delivered by four

integrated clinical divisions:

Surgery – all surgical specialities, theatres, anaesthetics and critical care

Medicine (including Cancer) – all medical specialities and emergency care

Women’s and Children – paediatrics, obstetrics and maternity care

Clinical Support – radiology, pathology, pharmacy, therapies and cancer services

The divisions will be responsible for the effective delivery of clinical services on all of the merged

Trust’s sites and out-reaching services.

Work has been on-going over the past year to align our existing clinical divisions into a triumvirate

model of divisional director, divisional medical director and divisional director of nursing; this can be

used as an enabler for further alignment. These teams are supported by transformation teams

based around the workstreams of planned, unplanned and out-of-hospital care.

It is proposed that merged divisions will provide cross-site leadership to all clinical services within

the new organisation. The newly appointed triumvirates will be accountable for quality, safety,

performance and financial delivery ensuring each business unit delivers on its key metrics and

consistently improves the quality and responsiveness of the services they provide.

To ensure that services continue to improve, the transformation team will be enhanced to support

the development of new pathways of care, ensuring that the principles of care ‘close to home’ is

maintained and that all hospital sites are utilised fully for the benefit of the local population.

Cross site management and delivery will have the benefits of ensuring:

Faster and more successful integration of cultures, working across sites to deliver a shared vision

of excellent patient outcomes delivered safely and efficiently

Improved ability to support the joint clinical collaborations as highlighted in section 5

Implementation of merged clinical and operational policies to improve safety across the sites

where clinical staff are working in multiple locations

Staff move easily across sites to further develop skills and experience, cover on-call

responsibilities and workforce gaps to reduce risk

Capacity and demand is managed across sites to reduce patient waiting times and maximise

their choice of where to be treated.

It is proposed that, to ensure focus on Burton Hospitals is maintained, a Managing Director (MD)

Burton post will be included within the merged Trust’s board structure with specific responsibility for

supporting day to day management and ensuring appropriate senior management attention is

focussed on the Burton located sites and services. The MD will be supported by a Burton Hospitals

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based senior management team. The MD will also work with external partners to deliver the

strategic operational change required for a successful health economy through the sustainability and

transformation plan in Staffordshire. This includes integration of services with GPs in Tamworth and

Lichfield.

7.9 Performance management

The new structure will allow focus on the significant challenges in maintaining and improving quality,

whilst delivering day to day operational services, aligning processes and procedures and most

importantly the cultures across all of the sites within the enlarged merged Trust. Consequently, a

robust and comprehensive performance management framework with a single set of associated

performance reporting systems are essential. At the heart of this is the need to ensure that there is

clear visibility and accountability for performance at all levels of the organisation. The Chief

Operating Officer will be the accountable officer on the Board responsible for delivery of all

operational targets.

Non-achievement of performance will be managed in accordance with Trust policies to ensure staff

and patients receive the highest standards of care and welfare delivery.

7.10 Organisational development plan

The Organisational Development (OD) plan is attached as Appendix 22. This shows development

activities to be undertaken during FBC (e.g. engagement activities with staff to define the ‘new’ joint

BHFT/DTHFT way, focussing on high quality care, underpinned by shared values) plus activities for

100 days prior to and post the transaction implementation date, as well as longer term initiatives

that will continue well beyond 100days after the transaction.

Aligning culture and values

Aligning cultures and values both at a strategic and operational level will be a key area of work in the

OD plan (see Appendix 22 activities outlined under organisational culture). To achieve cultural and

values integration it is essential to ensure there is alignment of vision, values and

objectives/ambitions. As per the figure below PRIDE is a common theme/golden thread across

values and objectives in both Trusts.

Figure 49: Overview of current and emerging vision, values and objectives

DTHFT BHFT Hospitals Emerging from the collaboration work to date

Vision Taking Pride in Caring To be a national beacon for all that is best in the NHS delivering 21st century healthcare. We will be part of a flourishing network of health and social care partners to

When the people in our community need healthcare they look to BHFT

“Together, we can deliver outstanding care for all” Our patients Our people Our population Our partners

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integrate care for our patients, deliver clinically excellent results and be financially sustainable.

Values CARE CARE principles of Compassion, a positive Attitude, Respect and Equality

PRIDE Passion Respect Innovation Determination Excellence

“We CARE with PRIDE”

Objectives PRIDE Putting patients first Right first time Investing our resources wisely Developing our people Ensuring value through Partnerships

PRIDE Putting patients first Right first time Investing our resources wisely Developing our people Ensuring value through Partnerships

PRIDE Putting patients first Right first time Investing our resources wisely Developing our people Ensuring value through Partnerships

The final vision, values and objectives for the preferred collaboration form will be a matter for the

Boards and governors to finalise. It will be crucial for the FBC phase that the emerging vision, values

and objectives are clearly articulated alongside the emergence of the preferred organisational form,

such that they reflect a set of values that our staff subscribe to and feel they can ‘get behind’ and

also give a point of reference for how we go about implementing changes.

Preliminary indicators of current cultures:

Preliminary indicators of current cultures have been analysed, including a sample of key questions

relating to OD from the annual NHS staff survey as well as a small sample cultural audit carried out in

2016.38 Further broader and deeper cultural assessment work would be needed during the FBC

phase. From the staff survey and culture survey sample both organisations have similarities, see

Figure 49. There are also a number of cultural differences in terms of how staff feel currently at both

Trusts (indicative only as based on a small sample size), see Figure 50.

Figure 50: Extracts of the staff survey

Area from staff survey BHFT DTHFT

Staff recommendation of the Trust as a place to work or receive treatment 3.81 3.93

Staff Engagement levels 3.87 3.88

Staff satisfaction with the quality of care they are able to deliver 4.07 3.95

Recognition and value of staff by managers and the organisation 3.50 3.45

Effective team working 3.83 3.73

38

The cultural survey was based on the Quinn & Cameron ‘Competing Values Framework’ (CVF) model which identifies insights into the desired management/leadership behaviours, skills and competence for culture.

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Staff motivation at work 3.99 3.95

% of staff believing that the organisation provides equal opportunities for

career progression

93% 88%

% of staff able to contribute towards improvements at work 75% 71%

Good communication between senior management and staff 36% 32%

% of staff appraised in the last 12months 94% 86%

Source: Staff Survey analysis

Figure 51: Highlights of the culture survey

DTHFT Culture survey results highlights: BHFT Culture survey results highlights:

Unfailingly loyal and proud about the Trust

Lack of visibility of the Executive team – though some improvements addressing different visibilities at the two hospital sites

Staff have a voice and ability to suggest service improvements however there is a feeling that these are never heard from again

Disempowered and overwhelmed by management processes, targets and compliance frameworks

High levels of support for staff training and development.

The sense of family and togetherness was overtly evident and a credit to the organisation

Strong sense of vision and values which was felt to permeate through the organisation; both in management processes but also in the ‘way things are done round here’

Staff believed in the values and didn’t feel the values were imposed and that they felt the Trust was managed and run in line with the values

Seeming slow and too bureaucratic.

Staff do not have regular access to on line communications

Source: Trusts culture survey 2016 sample

Proposed cultural objectives

To work towards creating a common culture, we propose developing cultural objectives and

initiatives as part of the OD plan. In addition during the integration we will maintain focus on

identifying and maintaining the best of individual organisations culture.

Figure 52: Proposed cultural objectives for developing a merged organisation

Cultural Objectives: Example initiatives

1. Creation of a collective inspiring

vision, shared values and

compelling narrative – focused on

high quality care

Creating a clear joint vision for the future

Agreeing values, attitudes and behaviours we expect from our workforce to achieve this

2. Commitment to effective and

efficient performance

Developing a common set of ambitions by which all staff work to

Developing clear aligned goals and objectives at every level (Divisional, Business Unit and Teams)

Developing an accountability culture to deliver effective and efficient performance

3. Good people management and Developing and maintaining well trained managers

Developing clear employee engagement opportunities

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employee engagement (from team, to department, to division, to Board level)

Providing coaching and mentoring opportunities

Diversity at all levels of the organisation

4. Continuous learning and quality improvement culture

Supporting space to learn and improve

Providing varied opportunities to share learning

5. Enthusiastic team working, cooperation, partnership and integration

Developing team effectiveness

Leading across boundaries, opportunities for inter-team working (training and opportunities)

Developing systems leadership (training and opportunities)

6. Collective leadership approach Compassionate leadership and empowering staff to make service improvements

7.11 Outline workforce strategy

Overview of current workforce across our Trusts

DTHFT has a current workforce of c7,300wte and BHFT has c 2,770wte. Registered nurses and

midwives within both Trusts make up the largest staff group. The figure below sets out the

breakdown by staff group.

Figure 53: Overview of current workforce BHFT and DTHFT

Source: Trusts WTE date - tbc

Aligning our people strategy

Our current plans and strategies - Currently BHFT has an integrated Workforce and OD plan (2017-

2018). The plan is structured in line with Burke Litwin’s (1992) OD Model for performance and

change and as such will be used as a structure for the OD plan for merger. Whilst DTHFT does not

explicitly have a plan for OD, elements of work fitting under the above definition of OD exists both

0 2000 4000 6000 8000

Total Staff

AHP's, Professional, Scientific,Technical (including E&F &…

Clinical Services

Medical & Dental

Admin & Clerical

Nursing & Midwifery Registered

Burton

Derby

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in its current work and planned activity of its 5 year People Strategy (2017). Additionally both Trusts

commission NHS Elect, a national members’ network organisation providing NHS organisations with

support and training. NHS Elect will be utilised to support both at a strategic and operational level

the development and delivery of the OD plan.

Our proposed future OD Plan of activity (for collaboration) - The proposed OD Plan and its activities

divides the 12 factors of the OD model into 3 phases:

OBC through to FBC stage (pre decision planning phases)

Pre 100 days (before go live date)

Post go live date (up to 100 days) and ongoing (after + 100 days).

Further detailed work will be undertaken to align these activities and our people strategies during

the FBC phase, with the input from both Trusts’ staff.

Our proposed leadership strategy

The success of the preferred collaboration form depends on strong leadership and effective talent

retention through a period of great change. This strategy and the planned set of initiatives will

therefore be reviewed with input from staff and managers at both Trusts, to address the specific

needs of both Trusts prior to and during the period of collaboration, and to develop an integrated

approach to leadership development and talent management for the preferred organisational form.

7.12 Workforce implications for the proposed merged entity

There are a number of different workforce implications from the integration associated with the

preferred organisational form of merger and the legal route proposed. These include:

Transformation of the leadership and management structures

Transition of staff into the new organisation (TUPE of staff from BHFT to DTHFT under the

scenario described in section 7.1)

Our boundaries presently cross into two counties and our compliment of medical staff are

provided by both East and West Midlands

Recruiting staff to meet the needs of the new service.

Transition of Staff into the new organisation

A clear set of principles will need to be agreed, to inform the design of the process to transition staff into the new organisation. Outline proposed principles include:

Make the process clear and transparent

Ensure that the process is fair and seen to be fair

Provide strong governance to oversee the transition process

Define clear roles for HR and for line managers in managing the transition process

Ensure operational continuity through the people transition

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Carry out effective staff engagement and communications

The transition process has to be mindful of the legal framework within which the merger has to operate. This process is yet to be designed and put in place. A number of areas remain to be clarified and agreed, including:

Staff consultation and the change-management process

Transfer of Undertakings Protection of Employment regulations (TUPE)

Recruitment protocols and the redeployment process

Redundancy process

A retention process

An implementation team for the workforce transition process

Employment policies and terms and conditions

Both Trusts are already working together looking at core employment policies that can be aligned

between us to make this a smooth transition.

As part of the transition process a detailed review of the contracts of employment will be

undertaken to identify differences between equivalent roles, and to enable the reconciliation of

these differences. This work will be completed working in partnership with staff side

representatives.

Workforce KPIs

The workforce KPIs will also be aligned within the first 100 days to ensure that the same information is reported and this will contribute to a smooth transition. The proposal is that the KPIs would include: Sickness Absence; Appraisal rate; Turnover rate; Statutory and mandatory training rates; Staff Morale overall; Staff friends and families place to work; and Staff friends and families place to receive treatment.

Transition measures and controls

It is vital during the transition stage and beyond that we ensure continuity of operation and business

as usual. As part of the transition plan that will be fully developed post FBC the following key

elements will be included:

Recruitment planning

Creating redeployment opportunities internally and externally

Reducing potential redundancy costs

Retaining key skills.

Members/governors

The enlarged organisation would need to amend its constituency boundaries to ensure its membership is representative of the people to whom the enlarged Trust provides services. The

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enlarged merged Trust can either choose to incorporate the acquired Trust’s membership into its own membership (provided the members are given the opportunity to opt out) or it can disband the acquired Trust’s membership and recruit completely new members. A new Council of Governors will also need to be appointed for the enlarged Trust.

Conclusions:

We recommend that a legal acquisition of BHFT by DTHFT be considered as part of this OBC, as the most appropriate route to forming a combined Trust for practical and financial reasons. These include lower costs of transferring assets and also considering DTHFT’s status as a ‘teaching hospital’ would transfer to BHFT. In all other ways, the collaboration will be approached as a merger between two equal partners, effectively forming a new organisation as a result. We are committed to pursuing a true partnership of equals between the two Trusts.

We recommend that during the FBC phase a proposal be developed for a new name for the combined organisation. Our intention is to develop a name that reflects the wider population developed with our stakeholders as we go through the next phases of the collaboration work.

We are currently working to align the structure of our clinical divisions. In collaboration, these models would be merged to provide cross-site leadership, based on the triumvirate model. Each division would have a divisional director, divisional nursing director and a divisional medical director. All corporate functions would be combined to provide consistent and cost effective shared services across the new organisation. The overarching governance and operating structures for the proposed enlarged Trust have also been considered and are presented in this document.

The operational and management structures proposed would be underpinned by aligning the culture and values of both our organisations, based on our common PRIDE ambitions. We would begin our programme of OD at FBC stage and this would continue into post-implementation.

There are a number of different workforce implications from the integration associated with the preferred organisational form of merger and the legal route proposed. A clear set of principles will need to be agreed, to inform the design of the process to transition staff into the new organisation, this will form part of the implementation plans.

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8. Programme timeline, governance and management

This section describes the next phase of planning for production of the FBC. It proposes a timeline

and outlines the regulatory requirements. It also documents the programme governance structure,

the associated implementation costs and outlines the communications plan.

8.5 Programme overview

Subject to the OBC being approved at both Boards in June 2017, and agreement of resource to

proceed to FBC, the indicative timeline overleaf highlights a high level plan proposing completion of

FBC in October 2017, through to a final implementation date of the new organisation on 1 April 2018

(subject to agreement, approval of both Boards and both Council of Governors, continued support of

key commissioners and stakeholders and regulatory approvals). Public engagement would also

commence, subject to local purdah rules, at the beginning of June 2017 (after June Boards) and

continue through to the FBC delivery, with feedback and views feeding into the FBC and PTIP. There

will also be increased staff engagement at this stage.

This will necessitate the continuation of the project team plus additional internal and external

resource required not only to develop and produce the FBC, including the long term financial model,

and to carry out the due diligence exercise but also to produce the post-transaction implementation

plan. We are now planning on the basis that we will be required to go through the first stage

assessment of the Competition and Markets Authority (CMA) which calls for both a voluntary

notification and a full patient benefits case.

The governance structure to reach FBC and full implementation will broadly follow that which has

been in place for both SOC and OBC and this is shown in section 8.5. The workstreams have been

refined in order to reflect the further detail to be developed.

A further iteration of the MOU will be produced for the FBC to set out the joint expectations of the

project delivery phase of the FBC moving forwards and scopes of work, workstreams, and agreed

financial arrangements for cost sharing of the FBC project phase.

Separately a heads of terms for the Business Transaction Agreement (BTA) will be produced during

the FBC for the proposed transaction to set out the key agreed terms of the proposed transaction

including any transfer of asset arrangements and financial arrangements – see section 8.2.1.

This section sets out three main areas:

Timeline in two parts, including plan to approval and plan to implementation

Regulatory requirements including both CMA and NHSI

Programme governance and resource requirements including reporting structure and PMO

resource

8.6 Timeline

The figure below provides an indicate timeline of the programme from OBC, to FBC, to statutory

Transaction.

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Figure 54: Indicative Timeline to implementation of Option merger

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The timeline on the previous page provides and overview of the programme from OBC, to FBC, to

Statutory Transaction. There are two overlapping stages:

Plan to approval – regulatory review and assurance, through to transaction approval

(described in section 7.2.1)

Plan to implementation – production of the post transaction implementation plan and its

execution (described in section 7.2.2).

8.6.1 Plan to approval

The next stage of the plan to approval will follow agreement of the OBC at June’s Board meetings.

NHS Improvement’s framework for significant mergers and acquisitions is as follows:

Stage 1 - Strategic Options Case

Stage 2 - Outline Business Case

Stage 3 – Full Business Case

Stage 4 – Decision and execution

Approving this OBC and taking the decision to develop an FBC will initiate Stage 3 of this framework.

The next steps will be for our regional regulators to review our OBC and advise of particular issues or

risk areas that will need to be addressed in the FBC.

Following OBC approval and decision to proceed to an FBC, the Trusts, with support from NHSI, will

formally notify the CMA, with timing to be agreed via further discussions with NHSI and our legal

advisors. This will initiate a formal review of the potential impact on competition. As part of this

review, NHSI will provide advice to the CMA on the patient benefits of the merger, via a review of

our patient benefits case.

In parallel, we will agree Heads of Terms for the development of a Business Transfer Agreement

(BTA) which will set out the nature of the transaction, the new organisation and details of assets

liabilities and staff to transfer and we will develop a proposed amended constitution for the new

merged Trust, to reflect the membership, governors, board and governance structure of the

enlarged organisation.

Once we have developed the FBC in draft, we will need to undertake a due diligence exercise to

assure our Boards, and subsequently our regulators, that the FBC is comprehensive and robust. The

issues identified further to the due diligence exercise will be reflected in the final FBC.

Further Trust Board decision points are:

FBC Approval

Accountants’ Report Approval (each of the statements and supporting Board memoranda or

plan will be the subject of a review by an independent accountant or expert, to be selected and

appointed by the Trust. On conclusion of their reviews the reporting accountant or expert will

issue a report and a formal opinion on each of the four Board statements).

Board Transaction Approval by both Trusts

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Following submission of the joint statutory application by both Trusts to NHS Improvement, NHS

Improvement will review the FBC and proposed new constitution and issue a transaction risk rating.

The final stage is to obtain approval of both Trusts’ Council of Governors before a ‘Statutory Order’ is

granted by NHS Improvement.

8.6.2 Plan to implementation

The plan to implementation runs in parallel with the plan to approval. This is centred around the

development of a post-transaction implementation plan (PTIP). This period will commence on

agreement of the final OBC at Board in June 2017 and the PTIP will be completed with the FBC in

October 2017.

The detailed PTIP covers 3 areas:

The enlarged organisation and describes how the merged Trust will work, including the

management structure, governance arrangements and the proposed structure of clinical groups

The project management arrangements for integration and describes how the implementation

plan will be delivered including the governance systems and processes which will be put in place

to ensure safe ‘Day One’ operation of the enlarged Trust and the subsequent integration plans.

It will also focus on how the benefits of the transaction will be measured and delivered

The project workstreams and implementation plans will document workstream objectives,

milestones, risks and mitigations as well as all activities to be undertaken before and after the

transaction.

In order to merge the organisations there are a number of legal and regulatory approvals which are

required and these are documented below.

8.7 Competition

It is recognised that mergers can benefit patients by helping providers improve the efficiency and

quality of their services. At the same time, choice and competition also have an important role in

encouraging providers to deliver better services. The merger review process allows for both the

competition effects and the benefits of mergers to be taken into account in order to determine what

is in the overall best interests of patients.

“NHSI (previously Monitor) and the CMA work together to ensure that the interests of patients are

always at the heart of the merger review process. We want to ensure that the merger review

process is well understood and operates as quickly and predictably as possible, both to serve the

patient interest and to preserve public resources.”39

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Competition review of NHS mergers: A short guide for managers of NHS providers

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NHSI’s role is to provide expert advice and guidance on the regulatory framework governing

transactions in the NHS, to assess merger benefits and provide expert advice on benefits to the CMA

and to be the regulator of any merged BHFT-DTHFT organisation.

8.7.1 CMA

The CMA is the UK’s primary competition and consumer authority. It is an “independent non-

ministerial government department with responsibility for carrying out investigations into mergers,

markets and the regulated industries and enforcing competition and consumer law.”

8.7.2 The Process

There are three phases to the CMA evaluation:

i) Pre-notification

ii) Phase 1

iii) Phase 2 (only needed if the evidence supplied at phase 1 is not sufficient to

eliminate any competition concerns)

Pre-notification has no time limit but is an opportunity to liaise informally with regulators and

the CMA to provide data analysis, mitigating factors and patient benefits that are considered

sufficient to give CMA all the information they need to fully understand the local picture to what

their data analysis may suggest is an area of concern. It is a two way dialogue that is an

opportunity to prepare appropriately for the subsequent phases.

Note: A fee is payable to the CMA for notification which we believe would be £160,000 in this

case.

Once a merger has been formally notified to the CMA by NHSI (previously Monitor), the review

process is as follows:

In the Phase 1 review stage the CMA must decide whether there is a realistic prospect that the

merger will result in a substantial lessening of competition and have an adverse effect on

patients and/or commissioners by significantly reducing their choice of provider, and consider

NHSI (previously Monitor) advice on the benefits of the merger.

If the CMA believes that the merger will not result in a realistic prospect of a substantial

lessening of competition, or if the benefits of the merger outweigh any lessening of competition,

it will not refer the merger for a Phase 2 review and that would conclude the CMA’s review of

the merger.

40 working days is general guidance for the phase one review (this can be extended (up to

another 50 days) where undertakings in lieu of a reference to Phase 2 are offered).

If a merger is not cleared at Phase 1, the review progresses to Phase 2.

In the Phase 2 review stage, a CMA inquiry group carries out a detailed investigation to decide

whether a substantial lessening of competition is likely to arise. Relevant patient benefits are

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taken into account when deciding what remedies are needed, if a substantial lessening of

competition is found.

24 weeks is general guidance for the phase two inquiry (however this may be extended by up

to eight weeks). A further extension of 12 weeks is possible if remedies are required following

the inquiry.

Data Analysis

We have already engaged with NHS Improvement’s Competition and Co-operation Department,

which has been acting as an advisor to the collaboration project to help us understand the likely

level of interest from CMA in the proposed merger.

The CMA will consider as part of pre-notification and phase 1, whether the impact of reducing

competition in the above services, is likely to significantly affect patients.

We will also have an opportunity to provide evidence to the CMA to support the case in terms of

patient benefits of the proposed merger, and measures that we might put in place to ensure that

patients would not be disadvantaged by a reduction in choice.

8.7.3 Competition - next steps

BHFT and DTHFT are working to identify the possible impact for individual services. This is being

done in collaboration with NHS Improvement’s Competition and Co-operation Department and this,

in turn, will inform pre-notification discussions with CMA.

If this OBC is approved by our Boards, the next step will be to develop a Patients Benefit Case,

formally notify the CMA and commence a Phase 1 CMA review. It is likely that external legal and

economic support will be required in relation to this process. Estimates for these costs have been

outlined in section 8.52. We have estimated £580k for CMA Phase 1 (including the £160k notification

fee).

Note: If a Phase 2 review should be required, this will have a significant impact on the transaction

and implementation timeline. An FBC decision cannot be ratified without CMA approval.

8.8 Due diligence – prior to Board FBC approval and regulatory review

In the main, due diligence is undertaken on the Trust which is being acquired. The proposals relating

to due diligence as outlined in this OBC and below, for the most part are assumed to be undertaken

on BHFT (as the smaller organisation, to contain costs). In this instance, BHFT are also proposing to

undertake external financial due diligence on DTHFT to satisfy our Board and our external

stakeholders, given DTHFT’s unresolved structural deficit relating to the PFI.

The areas of due diligence (assurance that the FBC is comprehensive and robust and assurance all

key risks have been identified and taken into account in the FBC) required as assurance for FBC

Board approval and regulatory review, are listed below:

Clinical

Operational Management (HR, Pensions IT, Estates and Environmental)

Financial

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Legal (including Health and Safety)

Commercial and Contracting

We will also be procuring a review of the PTIP. These will be undertaken during the FBC stage, some

through internal due diligence and some through third party due diligence. The third party due

diligence will be undertaken by external legal advisors and by preferred partner in the process of

being identified (subject to Board and regulatory approvals).

8.9 Programme Governance Structure

The next stage of the programme will be delivered through a number of work streams that will

operate to drive activities within specialist areas. The oversight of the development of the FBC and

detailed implementation plans will be through a Transition Programme Board (figure below) which

will replace the existing Strategic Collaboration Project Board.

Figure 55: Transition programme Board governance and work stream structure

A project team will be required to develop the FBC and this team will need to be supplemented with

additional dedicated resource to deliver the more detailed outputs required.

For example, there will need to be significant focus on staff and public engagement, and an

implementation plan developed to cover each and every back-office and clinical service across both

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organisations, as well as ensuring that the necessary assurance is in place to support regulatory

review and approval at each stage. Feedback from other similar NHS transactions is that it is

imperative that there is dedicated programme management and implementation planning resource

to support this work. The workstreams are described below including organisational leads and

support required.

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8.9.1 Workstreams

1.Due diligence SROs: Chief Executive Officers

Support: Consultancy support for due diligence

Coordination to go through Project Coordinator (from Collaboration PMO)

This workstream will be responsible for production of the full due diligence report/(s). This will be a combination of due diligence undertaken by the Trusts internally and external due diligence undertaken by our consultancy partner and our lawyers. Our consultancy partner will undertake some assurance of our own internal due diligence to ensure completeness and consistency prior to Board approval.

2.Full Business Case and PTIP

SRO: Programme Director

Support: 1 WTE FBC writer/editor

Consultancy review of FBC

There are 2 products from this workstream 1) a FBC which will describe how the financial and clinical sustainability challenge will be met through the merger of the 2 organisations, subject to regulatory approval. It will include a high level implementation plan from approval through to the transaction date and beyond to the first 2 years post-merger. The FBC will also contain assurance from the due diligence work 2) a detailed PTIP will confirm workstream objectives, milestones, risks and mitigations as well as all activities to be undertaken before and after the transaction.

3.Clinical SROs: Medical Directors

Support: 2 WTE Project Manager (Medicine/Surgery)

This workstream will produce a full implementation plan for each of the clinical services, outlining how they will operate as fully integrated services across the 2 sites. A further product will be a bed model and a theatre model across the sites which will form part of a clinical strategy that will also be signed off as part of the FBC.

4.Shared Services SROs: Directors of Finance

Support: 1 WTE Project Manager

This workstream will complete deep dives for the remaining shared service areas (further 13 to complete). The product will be a set of operating models which will function across the 2 sites supporting both BHFT and DTHFT in delivery of services. This will include all workforce implications. In addition, a full implementation plan for each of the services will be produced and agreed and form part of the PTIP.

5. Communications and Engagement

SROs: Director Communications and Head Communications

Support: 1 WTE Communications Lead

This workstream will be responsible for both staff and public communications. An organisation name will be agreed along with production of the associated branding.

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6.Corporate Governance

SROs: Chief Executive Officers and Chairman

Support: Legal advisors x 2 (one for each organisation) 1 WTE external (including organisational structure and design) Director of Governance BHFT and Head of Corporate Affairs DTHFT

This workstream will agree the plan for merging of the organisations including preparing the new constitution for the merged organisation and plans for the new membership, the Board appointments, agreeing a Heads of Terms and producing and agreeing the business transfer agreement. We will each appoint separate legal advisors (separate advisors for BHFT and DTHFT).

7. Workforce and OD

SROs: HR Directors

Support: 2 WTE Workforce/1 WTE OD

This workstream has 2 elements: the workforce section will put in place the TUPE arrangements as well as agreeing and setting out the staff consultation. A redundancy plan will also be set out. One Workforce Lead will be responsible for the Clinical Workstream integration of services and the second will be responsible for the Shared Services integration of services. The detailed output of these will feature as part of the PTIP. For OD, the current plan and associated actions will be further developed to outline a way forward for the coming 3-5 years. The agreed actions from the current OD plan for OBC phase will commence in June 2017.

8.Finance SROs: Directors Finance

Support: 1 WTE LTFM, 0.5 WTE Internal Finance

The Finance workstream will complete an LTFM for BHFT, an LTFM for DTHFT and a further combined LTFM for the newly merged organisation.

9. Competition SROs: Programme Director

Support: Legal advice for voluntary notification

Consultancy support for patient benefit case

Economist input for voluntary notification and patient benefits case

Preparation for CMA stage one assessment will include the document required for the voluntary notification to CMA. It will also include production of a patients benefits case for both NHSI and the CMA.

8.9.2 Indicative programme costs

We have identified the resources required to complete the programme of work over the next three

years, this will be a mixture of internal and external capacity to support the delivery of the

programme and resources to cover the cost of change. The estimated costs are:

Total £2.7m in 2017/18 including £1.5m for 7 months FBC completion (with £1.0m factored

in for external legal due diligence and competition support); and £1.2m for the remainder of

2017/18 for implementation costs

This is followed by a further £2.6m in 2018/19; £1.0m in 2019/20 for implementation costs.

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Note these costs will increase if the post-holders are from a management consultancy, rather than

substantive appointments. The expectation is that this would be a mixture of consultancy staff with

internal staff; this has also been the case with development of the OBC.

The indicative programme costs for 2017/18 are shown overleaf, £2.7m in year and £1.5m for the f7

months from April to Oct 17 for the FBC delivery.

The phasing of the programme costs is outlined below for internal and external costs over 5 years.

Figure 56: Programme costs phased over 5 years

Area £m

2017/18 2018/19 2019/20 2020/21 2021/22 Total Non recurrent cost over 5 years

Project delivery team -1.0 -0.8 -0.4 0.0 0.0 -2.2

Clinical implementation

-0.3 -0.8 -0.6 0.0 0.0 -1.7

External costs -1.0 0.0 0.0 0.0 0.0 -1.0

Redundancy -0.2 -0.7 0.0 0.0 0.0 -1.0

IT integration -0.3 -0.3 0.0 0.0 0.0 -0.6

Total -2.7 -2.6 -1.0 0.0 0.0 -6.3

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Figure 57: Indicative programme costs 2017/18

NB. An activity model will be procured for beds and theatre which will inform a joint clinical strategy

and the FBC.

8.10 Engagement plan and strategy

A draft communication and engagement strategy is attached at Appendix 23. The purpose and

proposed arrangements are summarised below:

8.10.1 Purpose of the Strategy

Develop stakeholder understanding of the reasons why closer working and why service change is

necessary

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Ensure robust and effective communication and engagement systems are in place to ensure

joined-up, consistent, credible, timely and well-coordinated messages to stakeholders

Ensure robust systems for communicating and engaging with staff during a period of change,

enabling them to shape and become advocates of the new organisation

Build confidence among stakeholders in plans for working more closely together

Ensure best practice in terms of communication and engagement; for example, integrity,

openness, inclusivity and involvement is followed

Ensure Healthwatch, the relevant Overview and Scrutiny committees and other stakeholders are

appropriately briefed with the collaboration work.

Ensure formal consultation with staff on any changes that may affect them is undertaken as

required

Support the development of a common vision, values and culture for closer working

Start sharing a profile of closer working between the two organisations with their communities

Ensure communication on potential future organisational forms (including internal stakeholders)

and the commissioner-led STP external stakeholder process are aligned

Ensure communication is sufficiently resourced to be deliverable, using existing channels

whenever possible; ensuring value for money and appropriate use of public funds at all times

Conclusion:

If the final OBC is approved in June 2017, we would progress to stage 3 of the NHSI mergers and acquisitions process, which is the FBC stage. The key milestones and features which would apply would be the PTIP and FBC, completion of third party due diligence, formal notification to CMA, development of patient business case, completion of Phase 1 first assessment CMA review by October 2017 Following successful completion of stage 3 of the NHSI process, we would intend to proceed to stage 4 (agreement / completion) with a target date of April 2018 for completing the merger by acquisition and “go live” of the new organisational form (subject to regulatory approvals and discussions with the CMA).

For 17/18 we anticipate a total resource requirement for FBC of c. £2.7m in 17/18; £2.6m in 2018/19 and £1.0m in 19/20. At OBC stage, we have developed an Engagement Plan to ensure robust communication and engagement as our plans develop, and stakeholder engagement would be a core component of the FBC programme.

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9. Risks

This section provides an overview of current project risks and risk management process for the

project to date in section 9.1.

Section 9.2, outlines the key future risks from decision to proceed at OBC to the post-

implementation phase (section 9.2). The risks are grouped under the following headings:

Risks of not proceeding

Risks associated with preferred option of merger by acquisition

Risks associated with obtaining approval to proceed

Risks associated with mobilisation and implementation

Risks associated with the post implementation phase

9.5 Current project risks

The risks to achieving a preferred option for a collaboration that is jointly agreed by both Trust

Boards have been identified, documented, and tracked throughout the development of the OBC.

The full risk register including mitigations of project risks, to reach OBC stage, have been included in

the risk register which is reviewed and managed monthly at the Strategic Collaboration Board and at

respective Trust Boards. The risk framework that has been used is outlined in Appendix 24. The risks

are:

Strategic risk Description

Strategic Risk 1 Failure to deliver on key organisational performance targets whilst developing the formal collaboration.

Strategic Risk 2 Failure to secure support of partners in development of the formal collaboration. Partners include staff including staff-side, non-executives, governors, CCGs, the public and MPs, CQC, Scrutiny Committees.

Strategic Risk 3 Failure to sustain staffing levels given anxiety of potential change of organisational form

Strategic Risk 4 Failure, in the FBC, to achieve financial benefits outlined in the SOC and the

additional benefits identified in the OBC.

Strategic Risk 5 Failure to achieve deadlines agreed in OBC, given later Board decision

Source: Burton and Derby collaboration strategic risk register March 2017

9.6 Future risks There are a number of strategic, operational and financial risks for the Boards to consider on the proposals outlined in this OBC, these include: A) Risks of not proceeding with a merger including:

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Lack of ability to improve quality by reducing variability in patient outcomes and experience

Clinical sustainability of various services at one or both Trusts in the short and longer term

Failure to improve the financial position of the Trusts

Inability to find another suitable partner

Diminished position within the Staffordshire STP as standalone organisation on behalf of the local populations

Mitigating actions include:

Ensure sufficient accurate detail is provided to outline the benefits of a merger including clinical

and financial benefits.

Provide a contingency plan, should the option of merger not be agreed, to ensure the sovereign

Trusts remain integral to the work of the STP

B) Risks with obtaining approval to proceed with a merger, including:

Failure to obtain CMA approval for the merger and/or risk that the CMA refer proposals to a CMA Phase 2 investigation (a CMA referral would be likely to result in substantial additional costs and at least 6 months delay to the current transaction timetable)

Failure to win support from local public, patients and political figures for the change in organisational form

Failure to achieve a positive risk rating from NHSI, post CMA review

Failure to secure external funding for the transaction costs


Ensure a robust patient benefits case

Secure external consultancy support and expertise

Ensure a detailed FBC and PTIP

CEOs and Chairman to work with NHSI to secure external funding C) Risks associated with preferred option of merger

Slower decision making and deterioration in quality of care as a consequence of creation of a large organisation

Failure, in the longer term, to adhere to principle agreed of BHFT as a ‘vibrant’ district general hospital

Failure to understand and address the cultural differences between organisations

Failure to improve the financial position of both Trusts as a combined entity (as estimated in this OBC and subsequent forecasts to be developed in the FBC stage)

Perceived risk that the smaller party in the merger suffers as a result of losing its identity and a possible risk in future of management focusing most of their time and attention on the larger site.

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Develop and implement OD programme to support the large scale change

Involve patients in develop of new pathways across the hospitals

Ensure governance arrangements for merged organisation are agile and responsive

Develop and implement a clinical strategy for the merged organisation which maintains BHFT as a ‘vibrant’ district general hospital

D) Risks associated with mobilisation and implementation of a merger include:

Failure to obtain a timely decision on merger

Failure to maintain good organisational performance during transition, due to time and effort involved in transitioning to a single organisation

Failure to invest in the required leadership and management capacity to deliver the transaction

Lack of staff support for the merger resulting in slow clinical and support services integration

Failure to create a new organisational identity

Incorrect financial assumptions in the business case and financial benefits/savings opportunities result in unachievable financial forecast and loss of reputation of the combined Trust

Failure to transition from the 2 IT systems, to the interim solution of a single patient tracking index, and then to the full integration to 1 IT system (either Lorenzo or Meditech). This may impact on effective service delivery through the transition processes.

Failure to secure funding for the c. £10 million estimated for IT capital integration in the long term (or updated costs when known).


Ensure team in place, for production of FBC and competition case, during April 2017

Provide time (through PAs) and support (through project team) to operational and clinical staff for their input into development of both the FBC, the PTIP and the competition case

Develop and implement OD programme to support the large scale change

Undertake a consistent staff and public engagement programme across the hospital sites and the populations served

Involve staff, patients and the public in creation of the name for the newly merged organisation

Test financial assumptions during FBC stage to be assured they are realistic and deliverable

E) Risks associated with the post-implementation phase of a merger include:

Failure to deliver on intended benefits from the merger, both clinical and financial, which will be seen to have added no value to local healthcare.

Mitigating actions

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Develop and performance manage a benefits realisation programme which provides assurance of delivery against objectives set out in the FBC and the PTIP. This should be shared with the new Board as well as staff and the public.

Conclusions:

We have considered the risks and mitigations associated with each option i.e. not proceeding with a merger and proceeding with a merger.

The key risks associated with not proceeding with a merger include that we would be unable to individually materially improve service quality, patient experience or clinical and financial sustainability. BHFT would be exposed to the risk of a diminished position within the Staffordshire STP and both Trusts may be unable to find alternative suitable partners. Mitigating actions include ensuring sufficient accurate detail is provided to outline the benefits of a merger including clinical and financial benefits. A contingency plan should be developed, should the option of merger not be agreed, to ensure the sovereign Trusts remain integral to the work of the STP.

The key risk of proceeding with a merger is that there are diseconomies of scale associated with large organisations, including slower responsiveness and reduced communication. Mitigation actions should ensure governance arrangements for the merged organisation are agile and responsive.

The key risks associated with mobilisation are related to our organisational capacity and cultural cohesion. There may be challenges with maintaining internal grip whilst implementing the new organisational form and there is a risk of lack of support from staff groups. Mitigating actions include the development and implementation of an OD programme to support the large scale change and to provide time (through PAs) and support (through project team) to operational and clinical staff for their input into development of the FBC, the PTIP and the competition case. In addition, a consistent staff and public engagement programme will be undertaken across the hospital sites and the populations served.

The decision to proceed to FBC was planned for Board in April 2017. Additional time was

required for development of the financial case which may impact on delivery of the FBC to

Board in November 2017.

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10. Conclusion

This OBC set outs the evidence base developed for Boards to consider the following key question set

out in the MOU:

Which form of strategic partnership between BHFT & DTHFT (group structure or merger) most improves:

NHS services provided by both parties for the benefit of populations served

The financial positions of both Trusts and, therefore, the financial position of the local health economy

During this phase three workshops were undertaken to consider the organisational form options to

deliver clinical and shared service collaboration benefits. Of these options (status quo; group

structure committees in common; group structure hybrid model and merger), merger was found to

be the recommended solution to deliver quality and sustainability benefits as well as financial

benefits. Merger was also the form which most aligned strategically, but was less favourable in

relation to deliverability challenges with stakeholder support and ease and speed of

implementation.

Under the merged organisation by 2021/22 our work to date indicates there will be financial benefit

of £23.0m p.a. recurrently with non-recurrent transaction costs of £6.3million incurred in the first

three years. From 2021/22 onwards, the deficit of the (risk-adjusted) merged Trust is forecast to be

£2.0m yearly.

The secondary question outlined in the MOU and below, is for Boards to consider in June 2017:

Are the benefits identified for the preferred organisation form acceptable to both Boards, to proceed with the development of a Full Business Case for the preferred organisation form?

Both Boards are asked to approve the OBC and its recommendation of the preferred option (merger

of our two Trusts via DTHFT legally acquiring BHFT) for further development into an FBC and PTIP, by

the end of October 2017.

The next stage of work will require up to £1.5m for the 6 months of costs associated with FBC

delivery by the end of October 2017. The Boards should consider whether to self-fund the FBC


further pursue external funding, however if this is not secured in June 2017, there will be a risk to

delivery of FBC in October 2017.

A further request for external funding will also be made for the transitional costs which occur after

November 2017 amounting to c£4.8m.

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