Hon Tony Ryall
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HC07-16-2
DISTRICT HEALTH BOARD (DHB) SECTOR FINANCIAL PERFORMANCE FOR THE
ELEVEN-MONTH PERIOD ENDED 31 MAY 2009
Purpose and Background
1.
This report presents an overview of the financial performance of the DHB sector for the
eleven-month period ended 31 May 2009 based on data provided by the DHBs in monthly
financial templates.
2.
The report highlights where the sector or an individual DHB reports a significant variance
against plan or against comparable performance within the sector.
3.
Interpretation of the data provided by the DHBs enables identification of areas of financial
pressure and risk as well as best practice within the DHB sector.
4.
All 21 DHBs have approved DAPs for the 2008/09 financial year.
5.
Tables and appendices included in the report have been compiled from rounded data and
may not necessarily cross add.
6.
This overview is to be read in conjunction with the attached report detailing the impact of
individual DHB financial performance on the sector (enclosure), supporting schedules and
the DHB ‘one-page’ summary reports.
7.
Once this report has been signed by the Minster of Health, the report will be posted on the
Ministry of Health (the Ministry) website, exclusive of any highlighted paragraphs. The
website address for the report will be http://www.moh.govt.nz/dhbfp and filed under DHB
Performance Reports.
8.
The health report is copied to the Department of Prime Minister and Cabinet, Deputy
Commissioner of the State Services Commission, Director-General of Health, Deputy
Director-General Corporate Services, the Treasury (State Sector Performance Branch),
Crown Health Financing Agency, DHB Chairs and DHB Chief Executives.
1
DHB Sector Financial Performance
9.
Consolidated Statement of Financial Performance for the eleven-month period ending
31 May 2009
Actual
$ '000
TOTAL REVENUE
Operating Costs
Personnel Costs
Outsourced Services
Clinical Supplies
Infrastructure/Other Supplies
Subtotal
Payments to Providers
Personal Health
Mental Health
Public Health
Disability Support Services
Maori Health
Subtotal
TOTAL EXPENSES
NET RESULT
Average Accrued FTEs YTD
Avg Annual Cost Per FTE ($) **
Year to Date
Phased Plan
Variance
$ '000
$ '000
% Variance *
Full Year
Plan
$ '000
10,704,571
10,481,356
223,215
2.1%
11,454,433
3,874,778
398,778
949,784
1,098,419
6,321,759
3,803,917
317,538
889,655
1,102,265
6,113,375
(70,861)
(81,240)
(60,129)
3,846
(208,384)
(1.9%)
(25.6%)
(6.8%)
0.3%
(3.4%)
4,155,058
347,933
972,219
1,188,902
6,664,111
3,115,030
362,756
16,904
987,027
36,761
4,518,478
3,079,985
370,244
11,032
984,703
45,751
4,491,714
(35,045)
7,488
(5,872)
(2,324)
8,989
(26,764)
(1.1%)
2.0%
(53.2%)
(0.2%)
19.6%
(0.6%)
3,360,958
403,833
12,120
1,074,315
50,319
4,901,545
10,840,237
(135,666)
10,605,089
(123,733)
(235,148)
(11,933)
(2.2%)
(9.6%)
11,565,656
(111,222)
53,877
78,456
53,579
77,451
(299)
(1,006)
(0.6%)
(1.3%)
54,071
77,490
Note:
* The % column shows the year to date variance as a percentage of phased plan.
** The cost per FTE is calculated by annualising YTD Personnel Costs divided by the average YTD FTEs .
10.
As noted in the table above, the DHB sector financial performance for the eleven-month
period ended 31 May 2009 resulted in a sector deficit of $135.7M that was $11.9M
unfavourable to plan. A sector deficit of $24.4M was reported for the month of May 2009
against a plan of $14.0M. The year to date (YTD) deficit is unfavourable to the full year plan
($24.4M unfavourable) which includes Capital & Coast DHB’s expected gain on sale of
Kenepuru land budgeted for June 2009. The gain on sale of Kenepuru land is now not going
to be realised until 2009/10.
11.
Total revenue for the period was $223.2M (2.1%) favourable to plan. The favourable
variance was primarily due to increased funding being allocated to DHBs for Very Low Cost
Access and Under Six funding, Care Plus funding, the Human Papilloma Virus Immunisation
programme, additional Senior Medical Officer funding, Breast Screen Aoteroa funding and
Electives Initiatives funding.
12.
Expenditure in Personnel Costs was $70.9M unfavourable to plan (1.9%). Average accrued
YTD Full Time Equivalent (FTE) personnel as at 31 May 2009 was 0.6% above plan, with the
average consolidated cost per FTE 1.3% above plan. The above plan FTEs was driven by
nursing FTEs being 712 above plan (refer enclosure, para 12 and 13).
13.
Outsourced Services reflect an unfavourable variance to plan of $81.2M (25.6%). The
majority of this unfavourable variance ($53.9M) was attributable to outsourced medical staff
(Medical, Nursing, Allied Health and Support Personnel) which is indicative of the difficulties
facing the sector in recruiting and retaining permanent staff. Outsourced management costs
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(personnel and contracted services) were unfavourable by $11.0M whilst outsourced clinical
services were $16.3M unfavourable to plan.
Major Pressures and Risks
14.
The major pressures and risks influencing the financial performance of the DHB sector for
the eleven-month period ended 31 May 2009 include the following.
 Workforce costs (employed and outsourced) – the largest single cost for all DHBs, either
directly though its own Provider arm or indirectly through the NGO sector. These costs
are driven by retention and recruitment issues leading to the use of locums.
 Workforce shortages – the use of locums in the sector is being driven by recruitment and
retention difficulties, the increasing degree of specialisation, and professionals being able
to earn more when locuming.
 Population growth and ageing – increasing demand for aged residential care and home
care.
 Demand driven expenditure – predominantly in the areas of pharmaceuticals and the
related scripts being issued and patient transport costs.
15.
Note that from the month of April (reported in May), each DHB is required to report to the
Ministry accrued FTEs in the management/administration personnel category against each
individual DHB’s caps. The Ministry is in the process of providing the May 2009 report to the
Minister.
Recommendations
The Ministry recommends that you:
(a)
note that the DHB sector financial performance for the eleven- Yes/No
month period ended 31 May 2009 resulted in a net deficit of
$135.7M that was $11.9M unfavourable to plan.
(b)
note that all 21 DHBs have approved DAPs for the 2008/09 year.
(c)
highlight any paragraphs you do not want to be posted on the Yes/No
Ministry’s website.
Yes/No
Anthony Hill
Deputy Director-General
Sector Accountability & Funding
MINISTER’S SIGNATURE:
DATE:
Ministry Contact 1:
Name: John Hazeldine
Phone: 04 496 2396
Cell:
027 271 3218
Ministry Contact 2:
Name: Bridget Hesketh
Phone: 04 496 2409
Cell:
021 802 416
Ministry Contact 3:
Name: Tracy Roberts
Phone: 04 816 2699
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ENCLOSURE: INDIVIDUAL DHB FINANCIAL PERFORMANCE IMPACTING ON
THE SECTOR FOR THE ELEVEN MONTH PERIOD ENDED 31 MAY 2009
DHB Net Results (refer schedule one)
16.
The DHB sector financial performance for the eleven-month period ended 31 May
2009 resulted in a sector deficit of $135.7M that was $11.9M unfavourable to plan.
17.
The following DHBs reported significant year to date consolidated variances to plan.
 Waikato DHB reported a surplus of $2.9M that was $12.5M unfavourable to plan.
This variance is driven from the Provider arm ($17.9M) predominantly due to
unfavourable personnel costs (including outsourced personnel costs) since
February, offset against the favourable result in the Funder arm ($4.1M).
 MidCentral DHB reported a deficit of $10.6M that was $6.1M unfavourable to plan.
This variance is driven by unfavourable to plan personnel costs (including
outsourced personnel costs) in the Provider arm.
 Canterbury DHB reported a deficit of $12.3M that was $5.1M unfavourable to plan.
This variance continues to be mainly driven by unfavourable to plan medical and
allied health personnel costs, clinical supplies and infrastructure costs in the
Provider arm along with higher than planned expenditure in the areas of
pharmaceuticals and aged care in the Funder arm.
 Capital & Coast DHB reported a deficit of $54.8M that was $6.5M favourable to
plan. This favourable variance was driven from the Funder arm ($5.2M) due to
receiving more funding from the Ministry than planned. The gain on the Kenepuru
land sale budgeted for June 2009 is now not going to be realised until 2009/10.
DHB Funder Arm Revenue Allocation (refer schedule two)
18.
Total revenue was favourable to plan by $156.4M (1.6%). The favourable revenue
variance was contributed to by Auckland DHB ($30.4M favourable to plan) as a result
of Ministry funding above planned levels. Canterbury DHB also reported a revenue
variance that was $26.4M favourable to plan which was due to recognising additional
devolved funding and side contracts that were not included in the plan. In addition,
Canterbury DHB has accrued for an IDF price uplift ($5.6M year to date) which the
DHB understands was agreed by CEOs. The Ministry does not agree with the accrual
of the IDF price uplift and has requested that the DHB reverse this accrual. Canterbury
DHB has agreed to reverse the accrual in June 2009.
19.
Payments made by the Funder arm to the DHBs’ own Provider are $80.1M (1.6%)
unfavourable to plan, while payments to other providers are $26.8M (0.6%)
unfavourable to plan, meaning $49.5M of funding above plan ($156.4M) is yet to be
distributed.
20.
Whilst total payments to other providers were marginally unfavourable to plan the
following DHBs reported significant year to date variances to plan.
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 Hawke’s Bay DHB reported an unfavourable to plan variance (6.9%) which
continues to be mainly due to payments to primary health organisations (partially
offset by additional revenue), community pharmaceuticals and health of older
people costs (community based support services).
 Tairawhiti DHB reported an unfavourable to plan variance (6.5%) which continues to
be driven by an over-spend in demand driven services.
DHB Provider Arm Results (refer schedule three)
21.
Net results range from West Coast DHB with the highest deficit at 25.2% of revenue to
Bay of Plenty DHB with the highest surplus at 1.2% of revenue. In dollar terms Capital
& Coast DHB reports the highest deficit at $58.2M ($0.5M favourable to plan) and Bay
of Plenty DHB has the highest surplus at $3.2M.
22.
Personnel expenditure, outsourced services expenditure and clinical supplies
expenditure as a percentage of revenue for the period ended 31 May 2009 follow a
similar pattern to that reported for the period ended 31 May 2008.
23.
The total Provider arm deficit of $207.1M was $71.0M (52.2%) unfavourable to plan.
The main drivers of this unfavourable to plan variance were Auckland DHB and
Waikato DHB. Waikato DHB reported a Provider arm deficit of $19.9M that was
$17.9M unfavourable to plan. This variance was driven by additional expenditure
incurred, notably in the areas of personnel costs (including outsourced personnel
costs) and clinical supplies.
24.
Auckland DHB reported a Provider arm deficit of $33.2M that was $15.8M
unfavourable to plan which continues to be driven by an actuarial valuation resulting in
an unfavourable to plan accrual for employee entitlements and additional expenditure
incurred predominantly in the areas of personnel costs (including outsourced personnel
costs) and clinical supplies.
Average Year to Date Consolidated Accrued FTEs (refer schedule four)
25.
The YTD average accrued FTEs for the sector were above plan (299 FTEs), were
primarily driven by nursing (712). The above plan nursing FTEs were offset by below
plan allied health FTEs (316) and medical FTEs (142), highlighting the difficulties
facing the sector in the recruitment and retention of permanent staff in these areas and
DHB planning based on near full employment.
 Counties Manukau DHB reported FTEs 242 (5.3%) above plan predominantly in
nursing and support personnel. Recruitment of unplanned additional staff to cover the
four new hospital wards has contributed to the above plan nursing FTEs. Above plan
support personnel was due to the previously outsourced cleaning and orderly services
now operating in house.
 Auckland DHB reported FTEs 285 (3.6%) below plan predominantly in the areas of
management/administration and allied health. Outsourced personnel continues to be
utilised to fill these vacancies (consolidated YTD outsourced personnel costs $8.6M
unfavourable to plan).
 Northland DHB reported FTEs 74 (3.7%) below plan predominantly in medical which
continues to be due to unfilled vacancies.
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26.
Four of the 21 DHBs (Counties Manukau DHB, Capital & Coast DHB, Waikato DHB
and Bay of Plenty DHB) contribute to 54.5% of the above plan nursing FTEs.
 Counties Manukau DHB report nursing FTEs 129 (6.1%) above plan due to the
unplanned additional staff to cover four new hospital wards as mentioned above.
 Capital & Coast DHB report nursing FTEs 87 (5.0%) above plan is predominantly due
to higher than planned sick leave hours being taken.
 Waikato DHB report nursing FTEs 87 (4.6%) above plan and are currently reviewing
the controls around unplanned staff hours.
 Bay of Plenty DHB report nursing FTEs 84 (9.2%) above plan predominantly due to an
extremely low level of annual leave taken. To a lesser extent the DHB report nursing
resources recruited earlier than planned in ED and AT&R, unusually high number of
one on one care requirements and additional staffing requirements to meet higher than
planned utilisation levels.
27.
The difficulties in recruitment and retention have driven the unfavourable to plan
outsourced costs as shown in the following personnel categories.
 Although medical personnel FTEs were 142 (2.0%) below plan, both medical
personnel and outsourced medical personnel costs were unfavourable to plan
($26.3M and $40.5M respectively).
 Nursing personnel costs at $53.8M unfavourable to plan (both personnel and
outsourced costs) were contributed to by nursing FTEs 712 (3.1%) above plan.
 Allied health personnel FTEs were 316 (2.9%) below plan while allied health
personnel costs were $8.7M favourable to plan and outsourced allied health
personnel costs were $1.5M unfavourable to plan. This is indicating a general lack
of allied health personnel at present.
 Although management/administration personnel FTEs were 91 (0.9%) below plan,
both management/administration personnel costs and outsourced costs were
unfavourable to plan ($5.7M and $11.0M respectively). Each DHB started reporting
accrued FTEs in the management/administration personnel category against each
DHB’s cap beginning with the month of May 2009.
Annualised Average Consolidated Cost per FTEs (refer schedule five)
28.
The consolidated cost per FTE was 1.2% greater than the planned cost. A major
contributor to this unfavourable variance continues to be the higher rates being paid for
Medical FTE. The majority of DHBs report total average compensation per FTE within
$4,000 of plan.
 South Canterbury reported a variance that was $7,000 less than plan. The variance
continues to be mainly driven by total personnel costs being less than plan whilst
average FTEs were greater than planned levels.
DHB Balance Sheet (refer schedule six)
29.
Net cash held by the sector at 31 May 2009 was $315.7M, with debtors of $451.9M
and creditors of $787.2M. This indicates that if all the debtors and cash were utilised to
pay creditors, the sector would be left with a $19.6M cash shortfall. The reduction in
cash held by the sector in May 09 is contributed to by the $35.0M voluntary repayment
of equity by Auckland DHB.
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30.
Working capital for most DHBs was negative and at a sector level was $854.2M. Only
Lakes DHB, Northland DHB and Taranaki DHB have positive working capital and they
have all started or are about to invest heavily in major capital projects.
31.
The position reflected by the Balance Sheet at the end of a month will always show the
worst working capital position for DHBs as the sector receives 1/12th of its annual
funding on the fourth day of each month. The Current Ratio is also strongly influenced
by the level of the current provision for employee entitlements. The removal of the
provision for employee entitlements gives a Current Ratio for the sector of 0.91:1
which is marginally below the norm of 1:1.
Capital Expenditure (refer schedule seven)
32.
The capital expenditure for the sector was below plan by $116.3M. This variance was
reflective of DHB’s lack of accurate phasing of planned capital expenditure and delays
in commencing projects. Four DHBs reported significant year to date variances to plan
due to delays in initiating building projects (Lakes DHB, Bay of Plenty DHB, Otago
DHB and Waikato DHB).
33.
Five DHBs are currently undertaking major capital works – Nelson Marlborough, Bay of
Plenty, Capital & Coast, Counties Manukau and Waikato.
Outstanding Capital Charges (refer schedule eight)
34.
Overdue charges as identified in schedule nine have been discussed with the DHBs.
Auckland DHB and Taranaki DHB are only part paying due to no additional funding
having been received for capital charge on 2008/09 revaluations.
IMPLICATIONS FOR REDUCING INEQUALITIES
35.
There are no implications identified in this report for reducing inequalities.
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DHB “One-Page” Summary Reports
as at 31 May 2009
Health Report: 20091151
Purpose
To provide an overview of individual DHB performance for the eleven-month period
ending 31 May 2009 focussing on:

overall financial performance variance from plan for the DHB by the Provider and
the Funder arms and at the consolidated level

graphic presentation of monthly net surplus/deficit for the DHB compared to plan

capital expenditure variance from plan

equity movement variance from plan

key input, average YTD full time equivalents, variance from plan

key outputs, case weighted daypatient and inpatient discharges, variance from
plan.
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