Tuesday, 17 March 2015

Shrink Wrapped Part 2: Shrinking the (e)state

This post carries on where my previous post, Shrink Wrapped Part 1, left off (http://dataforlb.blogspot.co.uk/2015/03/shrink-wrapped-absorption-of-ridgeway.html ). These posts were prompted by news that Oxfordshire County Council’s “big plan” for services for people with learning disabilities in Oxfordshire is unlikely to include a further contract with Southern Health NHS Foundation Trust for learning disability services in Oxfordshire (see http://www.communitycare.co.uk/2015/03/13/southern-health-set-lose-5m-learning-disability-contract-significant-concern-care/ ). If this comes to pass, does Southern Health NHS Foundation Trust get to keep (and sell off) the sites of its learning disability services in Oxfordshire, often in potentially lucrative locations? As yet the answer to that question isn’t clear (to me, anyway). 

However, on the basis that past behaviour is the best guide to future behaviour, I’ve been looking through Southern Health’s Board papers for clues about their financial strategy when it comes to learning disability services in Oxfordshire.

My template for looking at this is the behaviour of an asset stripping venture capital company, with stages something like this:

1) Identify a financially struggling company and acquire it at a knock-down price.
2) Reduce running costs as much as possible and don’t make expensive investments into the company.
3) Sell off the assets piecemeal under there’s nothing left except for any highly profitable elements that can be absorbed into other company or sold at a huge profit.

The first post focused on Stage 1 – the merger/acquisition/absorption of Ridgeway, and the possible financial incentives for doing that were sufficiently attractive for 13 initial bidders to pitch for it.

This post focuses on Stages 2 and 3: after the absorption, what evidence is there in the Board (and other) papers for:
1)  Southern Health making serious investments into former Ridgeway sites (or not),
2)  Southern Health looking to sell off aspects of the former Ridgeway estate?
3) Southern Health looking to then divest themselves of responsibility for former Ridgeway services?

I don’t know why, but for some reason while I was writing this ‘Right Said Fred’ (the original and best song by Bernard Cribbins, of course) kept going through my head – probably slightly too benign a vibe, but anyway, here it is (https://www.youtube.com/watch?v=r5XX9LX2es4 ).

We was getting nowhere, and so we had a cuppa tea

Although there is a curious lack of attention paid in the Southern Health Board papers to the impending absorption of Ridgeway, there is a focus very soon after on potential financial issues that require attention, although issues about how good the Ridgeway services are seem to be treated with some complacency:

“The Learning Disability division now stretches across Buckinghamshire, Oxfordshire, Hampshire and into parts of Wiltshire and Dorset. The newly configured services are currently finalising the clinical strategy and business plan ensuring it is in line with the rest of Southern Health in developing its services with a 'business as usual' approach. The next 12 months will see the services undertake a financial recovery plan and a detailed quality improvement plan that is supported by commissioners and centred on the needs of service users.” (CEO report, 28 Nov 2012).

“The Chairman sought clarification as to whether there were any issues, in particular in relation to quality of care. The Chief Operating Officer noted that there had been no issues to date, largely due to the robust due diligence undertaken; she confirmed that in relation to the transfer of patients between facilities, there was no indication of systemic problems… In relation to the financial recovery plan, the Chairman sought clarification as to the progress with marketing beds at Postern House. The Chief Operating Officer confirmed that the Trust needed to fill three more beds, two of which were likely to be filled soon, in order to reach a breakeven position, and would then look to further increase the financial viability of the service” (minutes of 28 Nov 2012, Board meeting).

[Postern House is an inpatient service in Wiltshire where there was heavy capital investment in the year before absorption by Southern Health].

General financial plans for Southern Health for 2013/14 involved making substantial cuts at a time of reduced income to generate a surplus, with former Ridgeway services explicitly mentioned as a location for ‘savings’:

“The Trust’s income will reduce by 1.3% for 2013/14, in line with the national NHS settlement. Internally we plan to generate £17.8m cost reductions, to enable the Trust to cover cost pressures including inflation, and to enable investment in further service improvement and the development of the capability of our workforce. The financial plan is to generate a surplus of £4.5m.”

“Corporate and back office services will continue to deliver both cost efficiency savings and restructuring savings. 2013/14 will be the third year of a three year plan to deliver savings of 25%, alongside savings planned following the merger with Ridgeway Partnership during 2012” (Summary of Annual Business Plan 2013/14; 28 March 2013).

There are also statements in the strategy about capital investment, with former Ridgeway services mentioned generically but with no specific plans attached:

“An allocation of £4.0m will be required to fund service developments/estate rationalisation, including works at the Becton Centre, Petersfield Hospital, the Bridge Centre and Ravenswood and Learning Disability units in Oxfordshire & Buckinghamshire.” (Summary of Annual Business Plan 2013/14; 28 March 2013).

A year later, it appears that investment in the learning disability services estate was still effectively absent: “Sue Harriman reported on the progress in relation to the turnaround plan for the Learning Disabilities Division. She noted that the Trust was on plan, or ahead of plan for delivery of key actions, with the exception of those relating to Estates” (Board minutes, 25 March 2014).

By the 10 Sept 2013 Board meeting, all parts of Southern Health were failing to deliver against their ‘cost improvement’ targets, with the learning disabilities Division forecasting a shortfall of £0.9 million by the year-end due to ‘unfunded beds in Oxford services’. This forecast had increased to a £1.1 million shortfall by 25 March 2014 and ended up being £3.54 million over budget (27 May 2014). This was a consistent theme into 2014/15, with the learning disabilities Division already forecast for an end of year shortfall of £3.8 million by November 2014.

So overall, there seems to be a picture of a lack of capital investment in former Ridgeway services, and swingeing expectations of ‘cost improvement’ (i.e. cutting costs) in learning disability services that were repeatedly not being met.

Take off all the handles, and the things wot held the candles

It seems always to have been part of the financial plan that parts of the Ridgeway estate were to be sold off. Before absorption, four Ridgeway properties (Wadham Court, Selbrook Villa, Northview, Lanterns) had been identified as ‘surplus to requirements’, although they were only to be sold after absorption, with the money going into Southern Health’s coffers (these were eventually put up for sale at a total price of around £1.7 million). However, it appears that this wasn’t enough, with further ‘estates rationalisation’ required (allied to a worrying lack of preparedness in terms of service and clinical leadership):
“3.9. Learning Disabilities: Risk a) Sustainable cost effective services in 2013/2014 are dependent on business plans with significant change programmes including estates rationalisation. b) Divisional leadership has changed and Clinical Service Directors are not yet established.” (Chief Operating Officer’s Report, 28 March 2013).

And even at this point, less than six months after absorption, there are ominously worded statements about the Slade site in Oxford:

“The division is also working closely with corporate services to ensure alignment of business plans e.g. an estates strategy will be developed that will support operational delivery. It is fair that there are both opportunities and challenges in relation to this, particularly on the Slade site in Oxford.” (COO Report, Divisional Update, 28 March 2013).

It is unclear to me whether the Slade site is being considered as opportunity or challenge.

There are further sinister signs for the Slade site in the 23 April 2013 Board papers, where:

“There are also some challenges in relation to the condition of some of the estate, particularly on the Slade site where buildings are now of an age that they need significant refurbishment. The Division will work closely with other Divisions to ensure that joint decisions and priorities are both understood and agreed” (COO Report, Divisional Update, 23 April 2013).

So there is a clear recognition that the Slade site is in serious need of refurbishment, but the opacity of what to do about it is remarkable, and certainly doesn’t seem to involve actually doing any refurbishment. The lack of urgency is evident, in that exactly the same statement is copied and pasted into the ‘Divisional Update’ prepared for the 29 May and 23 July 2013 Board papers. Followers of #justiceforLB might well wonder why this statement disappears from further ‘Divisional Updates’ after this point.

There was more in a similar vein in the 10 Sept 2013 Board meeting, from the acting Chief Executive Officer:

“Sue Harriman advised the Board that a post-acquisition benefits realisation was on-going within the Trust’s Learning Disabilities Division. She reported that this had identified some successes, but also some challenges and concerns. She noted the significant financial challenges that the Trust needed to address, which had been highlighted through the due diligence process”.

Given all this due diligence and earlier recognition of the poor state of the Slade site, it’s surprising to me that Southern Health were apparently so surprised by a damning CQC inspection of these services (followed by a succession of less than stellar CQC inspections of other Southern Health learning disability services):

“The Care Quality Commission (CQC) conducted a three day inspection of services on the Slade House site in Oxford in mid-September. The inspection identified a number of areas of compliance failure and as such it is incredibly disturbing that these issues had not been identified internally through tried and tested governance processes. We have taken the findings from the draft report incredibly seriously and have ensured these services are safe and of appropriate quality in the immediate terms whilst fully investigating and generating organisational learning” (COO Report, 29 Oct 2013).

This point of crisis seems to have forced a little more clarity from Southern Health about their intentions for the Slade site:

“There are some longer term building challenges particularly around STATT House, which needs to be balanced against the trust investment criteria and future commissioning intensions [sic]. In the meantime, these challenges are being planned for and will be implemented when service decisions have been made” (Learning Disabilities Division Report to Board, 29 Oct 2013).

By March 2014, the prospects for estates ‘rationalisation’ across Southern Health is becoming more apocalyptic:

“The Trust’s Estate Strategy has been refreshed and is currently going through an internal ratification process. It continues to support the clinical strategies, resulting in a proposed reduction of approximately 13 freehold (circa £6.8m total carrying value) and 11 leasehold properties over the next two years. This will contribute a further £1.5m of savings per annum to the total occupancy cost and consequent revenue position of the Trust. The strategy is an interim refresh and a more radical estate strategy and rationalisation plan will be developed with the challenge to reduce the cost of estate by an ambitious target of 20-25%” (Finance Report, 25 March 2014).

And by June 2014, the specific implications for learning disability services are spelled out:
“Costs within the Learning Disabilities Division exceeded budget by £748k at the end of May 2014. This mainly results from the divisional CIP target of £729k for the same period. The Division has had to address issues involving both the quality and profitability of services and radical action has been taken where appropriate.”

“Postern House has now closed, relieving recurrent losses of around £400k per year, with notice also served on community services in Swindon and Wiltshire. A paper evaluating the viability of John Sharich House is being progressed. Work is ongoing with Oxfordshire County Council to develop a more community oriented model which should be more clinically effective and cost effective, and this forms a major part of the planned redesign of services. Further options are being explored in Buckinghamshire and in LD Specialised Services.” (Integrated Performance Report, 24 June 2014).

And by November 2014, Postern House, together with Hampshire learning disability sites Westview and Home Farm, were officially declared “surplus to requirements…and the properties are now being marketed” (Chief Executive’s Report and Directors Report, 25 Nov 2014).

So Charlie and me had another cuppa tea, and then we went home

The first concrete sign of Southern Health withdrawing from a former Ridgeway service came in December 2013: “There are ongoing discussions with Swindon and Wiltshire regarding the future of service provision in these areas”. Unsurprisingly “The Division recognises some unsettling times for staff in Swindon and Wiltshire, whilst the future of services is agreed” (Learning Disability Division update, 10 Dec 2013).

The decision came swiftly, by 25 March 2014: “For some time the Division has been reviewing its ongoing provision on the community element of the contract with Swindon and Wiltshire. Presently, we only provide Psychology and Psychiatry and as such have limited influence on overall pathways of care, which we do not believe are in the best interest of the people we look after. Having worked with Commissioners over the last year, we have served notice on both services, and we will stop providing those services by 29 January 2015. However, should the pathways become clearer during the notice period, we remain open to negotiations” (Divisional Reports, 25 March 2014).

More generally, throughout 2013 and 2014 there are increasing rumbles about the financial performance of the Learning Disabilities Division within Southern Health, usually attributed to ‘under-occupancy’ of inpatient units in Oxford and Postern House and/or a move from block contracts to spot purchasing. 

As far as I can see (at this point the full set of Board papers is over 200 pages long), the 28 January 2014 Board meeting contains the first implication that Southern Health considers the whole commissioning model as unsustainable:

“11.1 The Division continues to face a difficult financial challenge, and has not yet realised the planned CIP [Cost Improvement Programme] in year. A significant proportion of the divisional position is a result of loss of income within in-patient facilities commissioned via ‘spot purchase’, as such there is no longer guaranteed income for a number of our units. This commissioning position is unsustainable for Southern Health, who have a strategy to reduce dependency on beds and increase community services” (Learning Disabilities Divisional Progress, 28 Jan 2014).

[As an aside, I don’t understand why a strategy of reducing dependency on beds requires block contracts for, er, beds, but then again I’m probably not strategically sophisticated enough]

This is put in stronger terms in the 25 March Board meeting:

“The Division has seen a significant underachievement of its income to date and poor delivery of its CIP programme. This financial underachievement has been in the main a result of quality issues and mitigation plans in the LD services provided in Oxford, Swindon, Wiltshire and Buckinghamshire. Significant service redesign with the planned reduction of bed based services and investment in community based provision in these counties is required to ensure financially sustainable services. This requires Commissioners to re-commission LD pathways and wide-scale system and service re-design; this creates a significant risk for the Trust if the pace and scale of change is not acknowledged by all” (Learning Disability Divisional Progress, 25 March 2014).

And, in a final straw: “Southern Health’s current contract to provide Learning Disability Services in Oxfordshire expires in December 2015. Commissioners have commenced the process of procuring a provider of these services” (Southern Health Summary Strategic Plan 2014-2019).

So, in a year’s time, what will be left of the former Ridgeway Trust within Southern Health? This map from a presentation to the Board by the learning disabilities division soon after absorption shows all the Trust’s learning disability services at that time. It looks like all the Oxfordshire and Swindon and Wiltshire services will have gone with, to date, substantial proceeds from the sale of sites – is there any reason to suppose that the Slade House site will be any different?

Southern Health’s 5-year strategic plan, submitted to Monitor, couldn’t be any clearer how things play out, from the SWOT analysis…

[I particularly enjoyed the CQC regulatory regime being identified as a threat; and the typically warped tribute to the #justiceforLB campaign in a weakness being “Current reputation largely based on quality issues in LD services]

…to the key ‘challenges’ faced by Southern Health’s learning disability services...

…And finally, the entirety of the summary strategic plan for learning disability services (yes, that really is it):

A stereotype of a venture capital company couldn’t have done it better. Who knows the motivations of senior Southern Health personnel when they decided to bid for Ridgeway, especially given that most of the ‘key challenges’ must have been obvious from the start? And who knows how they feel about that decision now? Surely it would be complete moral bankruptcy to take the proceeds of the Slade site back to Hampshire, rather than those proceeds being used to support people with learning disabilities in Oxfordshire. One thing I do know for sure – on their watch, a young man died. And none of the capital gains in the world are worth that.

Saturday, 14 March 2015

Shrink Wrapped: The absorption of Ridgeway

As reported by Andy McNicoll in Community Care, Oxfordshire County Council have been developing a ‘big plan’ for its services for people with learning disabilities, and it seems likely that this plan does not include a further contract with Southern Health NHS Foundation Trust for learning disability services in Oxfordshire (see http://www.communitycare.co.uk/2015/03/13/southern-health-set-lose-5m-learning-disability-contract-significant-concern-care/ ).

Oh frabjous day! Callooh! Callay! Has the Jabberwock been slain? And if is has, is it planning to whiffle off back to the tulgey wood with a big stash of cash in its claws that catch?

As @sarasiobhan first suggested last September (https://mydaftlife.wordpress.com/2014/09/01/sunshine-and-shade/ ), is it possible that the loss of its Oxfordshire learning disability contract may result in a financial windfall for Southern Health without any future hassle from those ‘non-Hampshire’ awkward types? If it loses the contract, does it get to keep (and sell off) the sites of its learning disability services in Oxfordshire, often in potentially lucrative locations? As yet the answer to that question isn’t clear (to me, anyway). However, on the basis that past behaviour is the best guide to future behaviour, I’ve been looking through Southern Health’s Board papers for clues about their financial strategy when it comes to learning disability services in Oxfordshire.

My template for looking at this is the behaviour of an asset stripping venture capital company, with stages something like this:

      1) Identify a financially struggling company and acquire it at a knock-down price.
2) Reduce running costs as much as possible and don’t make expensive investments into the company.
3) Sell off the assets piecemeal under there’s nothing left except for any highly profitable elements that can be absorbed into other company or sold at a huge profit.

This blogpost focuses on Stage 1 – what the papers say about the merger/acquisition/absorption of Ridgeway. A later post will focus on what happened after the merger/acquisition/absorption.

Surely an NHS Trust wouldn’t (and wouldn’t be allowed to) behave like this? Well, let’s see…

Stage 1) Find the limping wildebeest

Part of this story lies far back in the mists of time (probably around 2010/11). At this point, the plan (bound into the Health and Social Care Bill 2012) was for ALL NHS Trusts to become Foundation Trusts, largely on the basis of plans for financial viability.

Ridgeway (also known as the Oxfordshire Learning Disabilities NHS Trust), a relatively small, specialist learning disability NHS Trust spread across Oxfordshire, Buckinghamshire, Wiltshire, Dorset and North East Somerset, was always going to struggle to meet the largely financial criteria that would enable them to go it alone as a Foundation Trust, and were running a substantial financial deficit of up to £1 million in 2011/12 (http://www.lgcplus.com/sponsored-sections/capsticks-social-enterprise/ridgeway-to-be-taken-over-by-non-neighbouring-ft/5040963.article# ). Clearly a limping wildebeest in the pack.

Ridgeway therefore were compelled to seek a ‘merger’ (although it was more often referred to as an absorption or acquisition) with a Trust that had already reached Foundation Trust status. My guess is that this was instigating and managed by the local Strategic Health Authority, South Central SHA, and they wanted as many loose ends tied up as possible before they went out of existence in March 2013, in the Year Zero of the Health and Social Care Act (see http://www.nhsconfed.org/resources/2013/03/service-redesign-case-study-the-southern-health-acquisition-of-ridgeway ). From 13 initial bids for Ridgeway, 6 were longlisted. These were whittled down to Calderstones and Southern Health (itself the result of a recent merger), with Southern Health named as the ‘preferred partner’ for Ridgeway in March 2012 (http://www.southernhealth.nhs.uk/EasysiteWeb/getresource.axd?AssetID=39988&type=full&servicetype=Inline ) for the absorption to happen in some haste, November 2012, just before Year Zero.

Why was this ‘financially struggling’ Trust so attractive to so many bidders?

First, in the world of NHS absorptions, you don’t have to pay over any cash for your acquisitions.

Second, it looks like the Strategic Health Authority pumped an unspecified amount of money into Ridgeway in its last year, perhaps to sweeten the deal.

So, the final accounts for the old Ridgeway Trust for 1st April – 31st October 2012 (actually produced by Southern Trust after the absorption and available in the Southern Health Board papers for 29th May 2013 http://www.southernhealth.nhs.uk/EasysiteWeb/getresource.axd?AssetID=71931&type=full&servicetype=Inline ) say this:

The seven months to 31 October 2012 continued to be a challenging year financially with the Trust (Ridgeway) finding it difficult to reduce operating costs to match the reduction in income following the wholesale retendering of social care services by Oxfordshire County Council in 2011/2012 [all italics my emphasis]. As a result NHS South Central continued to provide transitional funding whilst the Trust worked with Southern Health to review and refine operating plans ahead of their formal acquisition on the 1 November 2012. Whilst the Trust was able to deliver a financial surplus over the seven months with the help of this financial support, this was slightly less than planned.”

Third, there was some heavy investment in two specific sites before the absorption, amounting to £1.9 million (these quotes also from the accounts):

“Building work was completed on the expansion and upgrade of the Assessment and Treatment services at Postern House in Marlborough. This was a major scheme that created six additional beds in a series of phases. It has also addressed longstanding issues around the fabric of the building, such as the roof, and improved the patient experience through improvements to the environment.

The refurbishment and expansion of the Assessment and Treatment services at the Ridgeway Centre (formerly 309 Cressex Road) at High Wycombe in Buckinghamshire was completed and opened in September 2012. This refurbishment programme makes this building a unique facility in the region and will provide a high quality, safe environment for patients that will be attractive to commissioners across a wide geographical area. This initiative supports the ambition to improve the strategic estate whilst delivering a planned vacation of leased estate thus reducing occupation costs.”

[Quite why the priority for investment was in expending Assessment and Treatment Units whilst government priorities pointed in exactly the opposite direction is a question for another day – perhaps building these up so other, shabbier ones, could be closed?]

A fourth element of the sweetened deal was an initial list of four buildings that Ridgeway had earmarked for sale but were not actually sold until after the absorption, with the proceeds planned to go to Southern Health rather than Ridgeway:

“Ridgeway had a number of buildings that have been declared surplus to requirement and are disclosed as ‘assets held for sale’ within the Trust’s Statement of Financial Position.

Wadham Court Contracts due to exchange in May 2013
Sellbrook Villa Contracts due to exchange in June 2013
Northview bungalow Being Marketed in June 2013
Lanterns Being Marketed in June 2013”

It will perhaps not surprise you that “The Trust worked closely with Southern Health on the development of a Ridgeway Estate strategy to support the operational requirements of the organisation.”

Finally, at the time of Ridgeway’s absorption by Southern Health, the value of the Trust’s property, plant and equipment amounted to £16.8 million. Southern Health’s annual report for 2012/13 (see here for details http://chrishatton.blogspot.co.uk/2014/03/a-public-accounting.html ) reports that fully £8.8 million of this amount was in the form of a ‘revaluation reserve’.

For some reason Mrs Merton’s question to Debbie McGee seems appropriate here: ”So, what first attracted you to the millionaire Paul Daniels?”