DAP 2009/10 Final 1 - Taranaki District Health Board

DAP 2009/10 Final1. The Hospital Provider Arm is facing a budgetary cost to funding gap resultingin operating deficits in each year covered by this plan. This financial gapcould increase to $8.40M in 2009/10 if other identified risks and associatedcosts (estimated at $ 2.30M) were to materialise fully. With the residual riskestimated at $1.70M, the resultant financial gap could be in the region of$7.75M. (Please refer to the “Sensitivity Analysis” section for details).2. In applying the stated budgetary assumptions, it is evident that current coststructures in the Hospital Provider have little to offer by way of savings,unless there are structural changes in some of its services, workflows andstaffing levels. In view of the increasing cost pressures and risks, the financialbudget for the provider arm hinges on the delivery of a number of efficiencyinitiatives, service changes and staffing movements, which are expected togenerate approximately $3.5M of reduced operating costs during 2009/10.(Please refer the “Efficiency & Productivity Improvements” section for details).3. Additionally, it is carrying unbudgeted financial risks in many of its coststructures that are likely to materialise in part or full during the plan period.(Please refer to the “Sensitivity Analysis” section for details).4. The Board therefore recognises that the operating cost to funding gap in theHospital Provider operations will need to be addressed through options thatcould result in changes to service configurations, models of care and realignmentof services within funding available. It acknowledges thesechanges are essential if the hospital services arm is to remain financiallyviable and sustainable when faced with increased costs on several fronts.5. In context of increasing cost structures and continuing operating deficits, it isto be noted that Taranaki DHB is about to embark on a staged redevelopmentof the Base Hospital inpatient facilities. There are several compelling reasonsto undertake the redevelopment, but non more compelling than the fact thatthe current hospital layout and structures are not conducive for delivery ofcomplex clinical pathways and modern models of care. Consolidation ofspecialist services and improved models of care and pathways will result inmore efficient use of clinical resources and thereby reduction in coreoperating costs. The redevelopment will pave the way for a recovery plan forthe hospital services to align itself more efficiently – both clinically andfinancially. The impact will be evident post redevelopment of the base hospitalfacilities.6. Likewise, the DHB Funder operations is planning disinvestments totalling $4million to enable the DHB Funder operations to manage its costs down anddeliver the operating surplus planned for 2009/10. It is also faced with anoverall exposure in its contracts estimated at around $1.0M for 2009/10, witha probability factor leaving a residual risk equating to about $0.50M. This is inaddition to the financial risks carried by the Hospital Services operations.(Please refer the “Sensitivity Analysis” section for details).7. In the final tally, though the Board is planning a financial breakeven it is facedwith:a. a significant cost to funding gap in its Hospital provider operations for2009/10 (and out years),b. additional financial exposure in its expense budgets which couldmaterialise in part or full45