Proposed merger of Mid Essex Hospital services NHS Trust ... · Trust (BTUH); hereafter collectively referred to as “the MSB Trusts”. The ambition is to create a financially sustainable

1

Proposed merger of Mid Essex Hospital services NHS Trust, Basildon and Thurrock University Hospitals NHS FT and Southend University Hospital NHS FT

Version 3.1, 11 May 2018

Strategic Case

http://en.wikipedia.org/wiki/File:NHS-Logo.svg

2

Foreword

Mid and south Essex is home to 1.2 million people and a wonderful place to live. We

are determined to provide the best health services for our local population so that it

is also a great place to live well.

The NHS nationally is facing many challenges including rising demand for services,

increasing public expectations, advances in technology and medical practice, and all

at a time when money is tight. In our area we have our own local challenges such as

workforce and skills shortages and a complicated health and social care landscape.

This was why our region was chosen in 2015 as one of three NHS ‘Success

Regimes’ in the country to encourage finding new solutions to these profound

challenges.

In this document we set out proposals that will enable our hospitals to overcome

some of those challenges and help deliver the vision of a much enhanced healthcare

system. Mid Essex Hospitals NHS Trust, Southend University Hospital NHS FT and

Basildon & Thurrock University NHS FT (MSB) have already come a long way on

that journey. We have a joint executive team to deliver a shared vision; we are

planning re-designed clinical services; and we have greatly improved communication

and cooperation between the Trusts.

We now firmly believe that to achieve all that and serve our communities as well as

possible, a merger of the three organisations into a single NHS Foundation Trust is

the right way forward. This will allow us to pool our resources, to invest in a

transformation programme and to ensure we move ahead in step. This ‘Strategic

Case’ document is the product of intensive joint work by all three Trusts over the last

18 months to agree a shared vision for acute health services in our area and to plan

how to deliver it. The Strategic Case demonstrates how our Trusts would work

together to improve the quality of our services and to meet the financial challenges

we face.

Through our work we have explored:

• how re-configuring clinical services will benefit the populations we serve;

• how the hospitals can best work together to deliver those clinical and other

benefits; and

• how we would deliver the necessary change.

We believe that the potential benefits are substantial. They include:

• improved safety and reliability of services through shared best practice and

the ability to deliver the best possible care models;

3

• improved access to services through shared resources in areas such as

diagnostics and pathology;

• the ability jointly to attract and retain high quality staff;

• the best possible specialist care through integration of the workforce and

infrastructure of three Trusts; and

• more efficient corporate services that offer better support to front line staff

and release resources to invest in better patient care

We are now confident that by merging our three Trusts and working in a

fundamentally new way, we can meet the challenges we face and lift the quality of

care to the highest achievable levels. This Strategic Case we now commend to you,

including plans for developing the ‘Transaction Business Case’, the ‘Patient Benefits

Case’ and the ‘Post Transaction Integration Plan’. In short, this is the detail on what

we plan to do, how it will benefit our patients, and how we will deliver the change.

Clare Panniker Chief Executive for Mid Essex NHS Trust.

Southend University Hospital NHS FT and

Basildon & Thurrock NHS FT (MSB Trusts)

Nigel Beverley Chair for Joint Working Board for the MSB

Trusts and Basildon & Thurrock NHS FT

Alan Tobias

Chair for Southend University Hospital NHS FT

Nick Alston

Chair for Mid Essex NHS Trust

4

Contents

Foreword ............................................................................................................................... 2

Version control log ................................................................................................................ 6

Abbreviations ........................................................................................................................ 7

1. Executive summary ...................................................................................................... 10

1.1. Introduction and background ................................................................................................. 10

1.2. Strategic case and evidence for change ............................................................................... 10

1.3. Options appraisal process and development of preferred option .......................................... 12

1.4. Intended benefits and quality impact of the merger .............................................................. 13

1.5. Financial case ........................................................................................................................ 15

1.6. Organisational design ............................................................................................................ 16

1.7. Programme timeline and governance .................................................................................... 17

1.8. Risks ...................................................................................................................................... 18

1.9. Conclusion ............................................................................................................................. 19

2. Introduction .................................................................................................................. 20

2.1. Purpose of the Strategic Case ............................................................................................... 20

2.2. Overview of the Trusts ........................................................................................................... 20

2.3. Overview of the Essex health system .................................................................................... 22

2.4. The vision for joint working .................................................................................................... 27

2.5. Programme infrastructure and scope of work ........................................................................ 28

3. Strategic rationale ........................................................................................................ 31

3.1. National context ..................................................................................................................... 31

3.2. Local context .......................................................................................................................... 32

3.3. Challenges faced by the Trusts ............................................................................................. 36

3.4. Conclusions for this section ................................................................................................... 43

4. Options appraisal process ............................................................................................ 44

4.1. Process undertaken to establish future options .................................................................... 44

4.2. Shortlist options ..................................................................................................................... 45

4.3. Assessment criteria and weightings ...................................................................................... 46

4.4. Evaluation of shortlisted options ............................................................................................ 47

4.5. Support for preferred option ................................................................................................... 48

4.6. STP/reconfiguration alignment .............................................................................................. 49


5. Expected benefits and quality impact ........................................................................... 51

5.1. Approach to identifying and measuring benefits.................................................................... 51

5.2. Expected clinical and patient benefits ................................................................................... 51

5.3. Operational and financial benefits to the Trusts .................................................................... 59

5.4. Benefits to the local health economy and to commissioners ................................................. 62

5.5. Key enablers to deliver the clinical benefits ........................................................................... 64


6. Financial assessment ................................................................................................... 68

6.1. Current financial position ....................................................................................................... 68

5

6.2. Assumptions .......................................................................................................................... 69

6.3. Income and expenditure ........................................................................................................ 72

6.4. Analysis of merger benefits ................................................................................................... 75

6.5. Transaction and transformation costs ................................................................................... 80


7. Organisational design................................................................................................... 82

7.1. Legal route to creating the Merged Trust .............................................................................. 82

7.2. Outline future board arrangements and emerging structure ................................................. 82

7.3. Outline operating structure of the proposed Merged Trust .................................................... 86

7.4. Outline organisational development plan .............................................................................. 87

7.5. Outline workforce strategy ..................................................................................................... 89


8. Delivery and programme management ........................................................................ 93

8.1. Programme overview ............................................................................................................. 93

8.2. Overall timeline ...................................................................................................................... 94

8.3. Regulatory requirements ....................................................................................................... 96

8.4. Programme governance structure ....................................................................................... 104

8.5. Workstreams ........................................................................................................................ 105

8.6. Indicative programme costs ................................................................................................. 109

8.7. Stakeholder engagement plan and strategy ........................................................................ 110

8.8. High level benefits realisation strategy ................................................................................ 111

8.9. Conclusions for this section ................................................................................................. 112

9. Risks .......................................................................................................................... 113

10. Conclusion ................................................................................................................. 116

Appendix ........................................................................................................................... 118

Appendix 1: Transaction Risk Register ............................................................................................ 119

Appendix 2: Commissioners Letter of Support ................................................................................ 123

6

Version control log

Version Date Issued to

1.0 14 March 2018 Delivery Group

1.1 19 March 2018 Programme Board and NHSI

1.2 29 March 2018 Joint Working Board and Delivery Group

1.3 06 April 2018 Programme Director, NHSI

1.4 17 April 2018 Programme Board, NHSI

2.0 24 April 2018 Deputy CEO, Programme Director, NHSI

2.1 26 April 2018 Programme Board

2.2 04 May 2018 Trust Board meetings in common

3.1 11 May 2018 NHS Improvement

7

Abbreviations

5YFV Five Year Forward View

A&E Accident and Emergency

ACO Accountable Care Organisation

ACS Accountable Case System

AHP Advanced Health Practitioner

ANP Advanced Nurse Practitioner

ARU Anglia Ruskin University

BAU Business as usual

BTUH Basildon and Thurrock University Hospitals NHS Foundation Trust

BBCCG Basildon & Brentwood CCG

CPRCCG Castle Point and Rochford CCG

CCG Clinical Commissioning Group

CEO Chief Executive Officer

CIP Cost Improvement Plan

CJV Contractual Joint Venture

CMA Competition and Markets Authority

CMO Change Management Office

CQC Care Quality Commission

CTO Chief Technology Officer

DMBC Decision Making Business Case

EIA Equality Impact Assessment

ENT Ear, Nose and Throat

ESR Essex Success Regime

FAU Frailty Assessment Unit

FBC Full Business Case

FOFGD Future Organisational Form Delivery Group

FT Foundation Trust

8

GGI Good Governance Institute

HR Human Resources

HSMR Hospital Standard Mortality Rate

ICAG Internal Compliance Action Group

ICS Integrated Care System

ICSA Institute of Chartered Secretaries and Administrators

I&E Income and Expenditure

IM&T Information Management and Technology

IT Information Technology

JEG Joint Executive Group

JSNA Joint Strategic Needs Assessment

JWB Joint Working Board

JV Joint Venture

KPI Key Performance Indicator

LOS Length of Stay

LTFM Long Term Financial Model

MAU Medical Assessment Unit

MDT Multi-disciplinary Team

MECCG Mid Essex CCG

MEHT Mid Essex Hospital Services NHS Trust

MFF Market Forces Factor

MSB, MSB Group, MSB Trusts

MEHT, SUHFT and BTUH

NED Non-Executive Director

NHS National Health Service

NHSE NHS England

NHSI NHS Improvement

OBC Outline Business Case

9

PAHT Princess Alexandra Hospital

PAS Patient Administration System

PAU Paediatric Assessment Unit

PCBC Pre-Consultation Business Case

PCI Percutaneous Coronary Intervention

PDC Public Dividend Capital

PFI Private Finance Initiative

PMO Project Management Office

PTIP Post Transaction Integration Plan

QIPP Quality, Innovation, Productivity and Prevention

RAG Red Amber Green ratings

SC Strategic Case

SCCG Southend CCG

SCP Surgical Care Practitioner

SEAU Surgical Emergency Assessment Unit

SHMI Summary Hospital-Level Mortality Indicator

SLA Service Level Agreement

SLC Substantive Lessening of Competition

SOC Strategic Outline Case

SRC Success Regime Committee

SRO Senior Responsible Officer

SUHFT Southend University Hospital NHS Foundation Trust

STF Sustainability and Transformation Fund

STP Sustainability and Transformation Plan/Partnership

TCCG Thurrock CCG

T&O Trauma and Orthopaedics

The Trusts MEHT, SUHFT and BTUH.

10

1. Executive summary

1.1. Introduction and background

The Strategic Case sets out the rationale, high level plans and viability of a merger

between Mid Essex Hospital NHS Trust (MEHT), Southend University Hospital NHS

Trust (SUHFT), and Basildon and Thurrock University Hospitals NHS Foundation

Trust (BTUH); hereafter collectively referred to as “the MSB Trusts”.

The ambition is to create a financially sustainable modern health system that delivers

excellence in local and specialist services, demonstrably improves the health and

wellbeing of our communities, and provides a vibrant place for staff to develop,

innovate and build careers. The proposals build on the Essex Success Regime

(ESR) and the local Sustainability and Transformation Partnership (STP) and

provides a route to deliver the transformation of care, required to deliver a

sustainable health economy for the 1.2 million people living in mid and south Essex.

The Strategic Case also sets out why further integration of the three Trusts, in the

form of a merger, is the best route to implement the service reconfigurations

currently being consulted on as part of the Pre-Consultation Business Case (PCBC).

Planning has been enabled by the existing joint working arrangements between the

three Trusts who have already shared a Joint Executive Group (JEG) for over

12 months.

The next steps following approval of the Strategic Case include:

● Development of a Business Case for approval by the three Trust Boards and NHS Improvement. This will develop the case in all areas from the proposals set out in this document

● Development of documents for approval of the merger by the Competition and Markets Authority (CMA), including the Patient Benefits Case (PBC) that will set out the key ways in which the merger will improve care outcomes for patients

● Development of a Post Transaction Integration Plan (PTIP) to set out the detailed plans for integrating clinical, clinical support and corporate services across the three Trusts

● Due diligence on the three Trusts to get assurance over the baseline position of the three Trusts and provide a platform for integration planning

1.2. Strategic case and evidence for change

National context 1.2.1.

Demand for NHS services continues to rise both in terms of patient volumes and the

complexity of the conditions they present with. This is driven by national trends such

as rapid increases in the elderly population and people living with long term

conditions. This puts a strain on limited resources, creating a challenge to delivering

high quality and financially sustainable care, particularly for smaller hospitals. Closer

11

collaboration between acute providers could help to meet some of these challenges,

as acknowledged in NHS England’s Five Year Forward View (FYFV).

Local context 1.2.2.

The national Success Regime programme was initiated in response to the FYFV to

support regions with deep rooted, systemic challenges; either with significant

financial deficits, service quality issues or both. Mid and south Essex was selected

as a Success Regime (the ESR) in June 2015. A lack of collaboration between the

three acute Trusts in mid and south Essex was a key driver of these challenges and

the region’s STP, building on the ESR, specifically proposed to address this through

the development of group working amongst the MSB Trusts.

In May 2017 the MSB Trusts developed a five year ambition to support the STP and:

“Create a financially sustainable modern health network that delivers excellence in

local and specialist services that demonstrably improve the health and wellbeing of

our communities and provide a vibrant place for staff to develop, innovate and build

careers.”

The proposed service reconfiguration is outlined in the PCBC, which sets out the

ways in which the mid and south Essex health economy intends to deliver services

to the population in the future. This includes the focus on building capacity outside of

acute settings, developing health and care around localities and five principles for

proposed future hospital services:

1. The majority of hospital care will remain local and each hospital will continue to have a 24hr A&E

2. Certain more specialist services which need a hospital stay should be concentrated in one place

3. Access to specialist emergency services, such as stroke care, should be via your local (or nearest) A&E, where you would be treated and, if needed, transferred to a specialist team

4. Planned operations should, where possible, be separate from patients who are coming into hospital in an emergency

5. Some hospital services should be provided closer to you, at home or in a local health centre

These principles have been subject to public consultation through the PCBC process

and remain important to considerations of alternative organisational models. Whilst

the existing joint working arrangements described in the next sub-section have aided

the planning of potential service reconfigurations, there have been significant

barriers to implementing change whilst the three Trusts remain as three statutory

bodies. Though the Trusts remain fully committed to taking forward the proposed

changes described within the STP and PCBC, the Trusts consider that the changes

and associated benefits would be best achieved through a merger.

12

Trust context – existing group model 1.2.3.

After extensive discussions between the three Trust Boards throughout 2016, the

MSB Group model was set up on 1st January 2017. It utilised the vehicle of a

contractual joint venture as an interim measure, whilst longer term options are

explored. This included the establishment of the JEG as well as a Joint Working

Board (JWB) to which the Trust Boards delegated certain decision-making powers. It

remains the case that all three Trust Boards retain ultimate statutory accountability

and authority for their own organisation. The MSB Group had the following

objectives:

● Enable planning to commence in redesign of pathways and clinical services

● Increase planning around efficiencies and productivity through creation of single teams across the MSB Group

● Improve communication between the Trusts

● Provide mechanisms for the sharing of risk and financial burden associated with changes

Whilst the MSB Group model has succeeded in its objective of facilitating partnership

and collaboration between the Trusts with a shared vision and substantive planning

for in changes aligned to that vision, progress in implementing change has been

slow. It has become clear that it is not sufficiently efficient or effective to implement

the scale of change required. Mechanisms for sharing risk have in practice been

unfeasible to deliver across three statutory organisations.

For clinical change through the MSB Group model, approval and agreement is still

needed from each of the three Trusts as they remain separate sovereign

organisations. Each Trust retains its own incentives and needs, and is individually

accountable to its own Board with regulatory pressures around, for example,

performance targets on a single site. This prevents the MSB Group from securing

optimum performance across the three Trusts as a whole. The result is multiple and

complex decision-making processes, extended timescales, duplicated leadership

positions, and duplicated assurance mechanisms. This has resulted in an associated

additional burden that is not sustainable beyond the medium-term. Where this

misalignment of incentives continues to occur under the MSB Group model, the

ultimate impact is in preventing the delivery of much needed improvements in how

we deliver care for the people of mid and south Essex.

1.3. Options appraisal process and development of preferred option

To respond to the challenges identified above, the three Trusts looked at the

alternative options for future organisational form. The approach to identifying options

and selecting a preferred option included meetings with a broad range of

stakeholders to collectively agree the evaluation criteria, shortlisted options and the

preferred option. Stakeholders involved included all members of the JEG for the

three Trusts, site leadership teams for each of the Trusts (including clinical,

13

operational and financial leads), the chair/deputy chair and other non-executive

directors (NEDs) for each of the three Trusts, governors or members of the local

patient council for each of the three Trusts, NHSI, and the CCG and STP lead.

It was agreed that remaining as three separate statutory bodies, whether as

standalone organisations or through maintaining the existing group structure, would

continue to create additional transaction costs, duplication of approvals, and

unnecessarily complex decision-making. Furthermore, there would be reduced

opportunities for a coherent workforce development strategy, access to services,

common clinical protocols and the shared use of assets, all of which are essential to

delivering proposed changes. Delays caused by the above could lead to service

reconfiguration not proceeding – ultimately preventing or delaying improvements in

patient care. This collectively is not an acceptable position for patients, the Trusts or

commissioners, particularly in light of the region’s higher than average mortality rates

and the challenges the Trusts individually face in their current configuration to meet

national performance standards. By contrast, in a single organisation with three

hospital sites, our resources could instead be applied to the successful and timely

implementation of the proposals in this consultation and ensuing benefits to patients.

The preferred option identified was therefore for the three Trusts to merge into a

single NHS Trust. The option was viewed as the most likely to deliver better patient

outcomes and a sustainable future health system.

1.4. Intended benefits and quality impact of the merger

The merger will enable the three Trusts to overcome many of the barriers to

delivering joined up and high quality services for the people of mid and south Essex.

Work on the articulation of these benefits is being progressed in order to provide a

robust evidence base for the merger. This will include information on benefits

provided to the clinical senate as part of the service reconfiguration proposals

currently being consulted on, and will lead to a PBC to be submitted to the CMA. As

above, the reconfiguration proposals are only seen as feasible in a sustainable and

timely manner if the MSB Trusts merge.

The merger is expected to bring about three ‘cross-cutting’ benefits to patients in

the form of:

● Improved safety and reliability of services, including improved outcomes such as decreased mortality rates, reduced infection and re-admission rates, delivered by sub-specialisation in certain specialities through a combination of standardising protocols and centralising where necessary.

● Improved access to services through greater capacity and the ability to offer, where it is of benefit to the patient, the choice of moving between sites mid-pathway to reduce waiting times. This will include reconfiguring pathways (such as in cancer), greater transparency for patients around the opportunity to access faster treatment by accessing services across the three sites and improved specialist services through the provision of the 24/7 specialist care

14

which can be delivered through combined staff rotas and the separation of specialist from generalist on-call rotas.

● Workforce improvements through greater sub-specialisation, educational opportunities and reduced reliance on temporary agency staff. There will be a larger pool of medical and nursing staff and the ability to improve retention and there will be a larger base of permanent staff through more attractive on-call rotas to medical professional staff, as well as links to the Anglia Ruskin University (ARU) with plans to develop programmes for local care professionals

Speciality specific patient benefits arising from clinician led reconfigurations of

services are expected in the following areas, based on a range of schemes from the

rollout of successful programmes at individual Trusts or opportunities to ring-fence

elective capacity (many of which formed part of the PCBC that is currently being

consulted on). These areas are:

● trauma & orthopaedics

● emergency care

● specialist stroke care

● cardiology

● respiratory medicine

● renal medicine

● general surgery

● gynaecology

● urology

● vascular

● cancer

● ophthalmology; and

● Hospital at Home services

Operational and financial benefits will include:

● Improved performance against metrics across the sites including A&E waits, reduction in length of stay and theatre productivity. This will include optimising existing resources from beds to staff to diagnostic equipment across the Trusts’ sites through the implementation of a common architecture and shared records

● Reduction in errors (and the resultant extended length of stay in hospital or repeated treatment) through a standardised clinical governance structure and metrics, better risk management, and a common culture of learning from incidents across three sites

● Strategic infrastructure planning including investment decisions in future estates, surplus land, IT, and high cost diagnostic equipment

● Integration of corporate functions such as IT, estates and procurement to ensure the sharing of best practice, reduced overhead costs and increased purchasing power; and

● Repatriation of services from London through sub-specialisation that allows care closer to home for our patients, including in complex general surgery, pain management and paediatric specialisms.

15

Benefits to the local health economy and commissioners include:

● Facilitating a significant reduction in system transaction costs as a result of moving to a single contract with commissioners and single points of contact with other organisations, thereby reducing the need for commissioners and other partners to engage individuals with each Trust as at present.

● Reducing commissioning expenditure through repatriation of activity of care from London to local hospitals as a result of the market forces factor and lowering the current reliance of commissioners on outsourcing to the private sector, enabled by the improved efficiency that operating at scale will have in a number of service areas, such as orthopaedics.

● Improving clinical advice and support to primary and community services which can be extended as a result of the creation of single clinical teams and rotas with sufficient flexibility to allow for dedicated hot lines, advice and guidance or virtual clinic support to aid patient management, which should reduce demand for outpatients and non-elective services.

● Supporting the development of community infrastructure and services.

● Reducing duplication in engaging with stakeholders - Commissioners and social care will only need to engage with one team rather than three organisations in order to co-ordinate the care of patients out-of-hospital

1.5. Financial case

The NHS continues to face national funding pressures, with a continued expectation

for providers to deliver year-on-year efficiency improvements, and additional funding

being primarily distributed on a non-recurrent basis. The STP plan sets out a high

level approach to improve the region’s financial sustainability. The merger builds on

elements of this, and is not only consistent with the aims of the STP, but will help to

drive its implementation.

The financial projections included in this Strategic Case are based on the 2018/19

operational plans, as submitted to NHSI on 8 March 2018. A range of assumptions

have been applied to these figures to generate the forecasts. The assumptions are

generally in line with those used in the STP planning process or have been updated

based on more recent planning guidance.

A counterfactual I&E was calculated that sets out the aggregate financial

performance of the three Trusts if they do not merge. In this case, it has been agreed

that the Group structure will be reverted, creating additional costs for individual

Trusts, as they invest in re-developing their individual leadership and governance

capabilities. We note that a CIP requirement of approximately 3.1% of annual

turnover in 2019/20 and 2.2% thereafter will be delivered under both counterfactual

and merger cases. The counterfactual case shows an aggregate net deficit of

£73.7m at 2023/24 across all three Trusts.

16

The merger case builds on the counterfactual position by:

● Adding the PDC dividend cost of the capital programme that enables the delivery of the clinical and some of the financial benefits of the merger

● Introducing merger synergies for corporate support services (£8.1m), Clinical support savings (£3.9m) and acute reconfiguration (£19.9m)

● Factoring in the reduced interest cost resulting from a reduced requirement for interim revenue support loans over the projected period

● Including STF funding to reflect the underlying improvement in financial performance of the Trusts driven by merger synergies

The result of the above is an improvement of £32.0m by 2023/24 (£31.9m excluding

PDC, interest, depreciation), which with the addition of a further £27.9m of STF

income leads to a forecast net deficit of £13.8m in the merger case, as shown in the

following figure.

Figure 1.1: Financial bridge from the 2017/18 forecast outturn to the 2023/24 merger case

1.6. Organisational design

On the basis that the preferred option is for a formal organisational merger between

the three Trusts, there are two main legal routes to bringing about a new

organisation. It should be noted that these are primarily technical definitions within

the NHS regulatory framework and that in substance the transaction would be a

merger. The legal routes are:

● A merger – this would involve dissolving all three Trusts and simultaneously creating one new Foundation Trust

● A merger by acquisition – whereby one of the Foundation Trusts legally acquired the other Foundation Trust and the Trust (note under the existing regulatory framework only Foundation Trusts are able to acquire other organisations)

£90.3m £87.2m

£206.9m

£84.5m

£52.5m

£13.8m

£47.9m

£122.4m

£8.1m £3.9m

£19.9m £1.7m £10.8m

£27.9m

£8.2m

£36.7m

£119.6m

£1.6m

-

£50m

£100m

£150m

£200m

£250m

Fo

recast

MS

B G

rou

pd

eficit 2

01

7/1

8

Non

-recurr

en

t S

TF

and

imp

airm

en

ts

Actiiv

ty a

nd

co

st

pre

ssu

res

within

20

18/1

9 p

lan

CIP

pla

n fo

r 2

01

8/1

9

Fo

recast

MS

B G

rou

pd

eficit 2

01

8/1

9

"Do n

oth

ing"

deficit

incre

ase t

o 2

02

2/2

3

"Do n

oth

ing"

co

mbin

ed

deficit 2

02

3/2

4

Bu

sin

ess a

s u

su

al C

IPs

Co

unte

rfactu

al

agg

reg

ate

de

ficit 2

023

/24

(pre

-ST

F)

Corp

ora

te s

upp

ort

savin

gs

Clin

ica

l su

ppo

rt s

avin

gs

Acute

reco

nfigu

ratio

n

Ad

ditio

na

l P

DC

div

iden

dfr

om

ca

pita

l p

rog

ram

me

Inte

rest

and

dep

recia

tio

n

Me

rge

d T

rust

de

ficit

202

3/2

4 (

pre

-ST

F)

ST

F fu

nd

ing

in

clu

de

d in

the

cou

nte

rfa

ctu

al

ST

F fu

nd

ing

re

sultin

g f

rom

the m

erg

er

Me

rge

d T

rust

deficit 2

02

3/2

4

Merger synergies:£31.9m

17

The Merged Trust will be governed at its highest level by a Board of Directors and a

Council of Governors. Subject to legal and regulatory advice about the legal form

which the transaction should take, the aim is to have a fully operational Council of

Governors and Board of Directors on 1st April 2019. The composition of the Board of

Directors for the Merged Trust will be a key strand of the preparatory work

undertaken during 2018/19, in full consultation with the Boards of Directors of the

three Trusts and in the case of the Foundation Trusts, their Councils of Governors.

The committee and governance structure for the Merged Trust will be developed

during 2018/19.

Initial work has been undertaken to define the options for the future operating model,

with a focus upon the most effective model to deliver the benefits of the

transformation in clinical services, clinical support services and corporate support

services. Over the summer of 2018, options will be developed for the future

operating model as work to progress service reform continues and, most importantly,

the decisions which are made by the CCG Joint Committee on service

reconfiguration are known. At all times the principle of ‘form follows function’ will

be observed.

1.7. Programme timeline and governance

The Project is currently being led through the Strategic Case phase by the Deputy

Chief Executive and Chief Transformation Officer, Tom Abell as Senior Responsible

Officer (SRO) and the Group Director of People Strategy and Organisational

Development (Danny Hariram) as Programme Director. Both are members of the

existing JEG and report directly to Clare Panniker (JEG Chief Executive). The

leadership structure will be revisited once an appointment to the Chief Commercial

Officer role has been made, which is currently anticipated early in the 2018/19

financial year.

Governance for the programme includes:

● Weekly Programme meetings chaired by the Programme Director and attended by all work-stream leads

● Monthly Programme Board chaired by a Non-Executive Chair and attended by Chief Executive, Deputy Chief Executive, Programme Director, Chief Financial Officer, Group Director of Strategy, Chief Medical Officer (CMO), Chief Technology Officer (CTO), the Non-Executive Chairs for the other two Trusts, NHSI and advisors

● Monthly JWB attended by members of the Programme Board as well as additional Non-Executive Directors from the three Trusts and site level Managing Directors

● Three separate Trust Boards to review and challenge key milestones, which has typically been through a ‘committee in common’ approach

● Engagement sessions with governors and patient representatives

18

The Trust has developed a programme plan that sets out the proposed work-streams

between now and the date for a proposed integration in April 2019. This includes

considering the interdependencies between the various work-streams including:

● Development of a Business Case and Post Transaction Integration Plan (PTIP) for the merger that will be reviewed by NHSI

● Development of Phase 1 submission for the CMA including Patient Benefits Case

● Service reconfigurations, including plans for approval in early July 2018 of the current PCBC

● Governance and organisational form development including plans for appointment of governors, boards and executives

● Due diligence of the three Trusts to understand the risks to the transaction, inform the integration planning and satisfy the three Trust Boards as well as meet NHSI requirements

● Capital Business Cases for capital schemes associated with the delivery of benefits set out in the Patient Benefits Case; and

● Financial modelling to demonstrate both the affordability and sustainability of the transaction

1.8. Risks

The risks to achieving a preferred option for a merger have been identified,

documented, and tracked throughout the development of the Strategic Case.

A Transaction Risk Register to reach the Business Case stage, is reviewed and

managed weekly at the Delivery Group, monthly at the Programme Board and at the

MSB Group Joint Working Board.

Most of the risks relate to the challenges associated with delivering a transaction by

April 2019, and are therefore associated with delaying the transaction to either July

2019 or October 2019. At this stage the key risks to proceeding with the transaction

at this stage are as follows and the approach to mitigating these is described in the

document:

● Team capacity and experience to deliver the transaction

● Issues with the consultation on service reconfiguration

● Interim performance of the three Trust and staff engagement

● Planning for implementation (ensuring benefits and addressing different cultures; and

● Obtaining approvals to proceed, in particular in relation to the capital works required to enable some of the patient benefits that the Trusts intend to rely on in submissions to the Competition and Markets Authority (CMA)

19

1.9. Conclusion

The Strategic Case sets out the national challenges facing the NHS and the

challenges facing the local health economy in mid and south Essex. It describes the

existing MSB Group Model, its successes and challenges and concludes that it is not

sustainable. It also concludes that a merger is the preferred option for the future

organisational form of the three Trusts, because it best enables the pace of change

and financial savings required.

It is therefore recommended that the Board for each of the three Trusts and NHSI:

● Approve the Strategic Case and agree to proceed to more detailed work on the merger including due diligence, development of a PBC and transaction business case, and the creation of a PTIP for the integration of the Trusts on Day 1, Day 100 and thereafter.

● Note that the Trusts are in discussion with NHSI regarding the future resourcing costs to support the transaction.

20

2. Introduction

2.1. Purpose of the Strategic Case

The Strategic Case sets out the rationale, high level plans and viability of a merger

between the three acute trusts in mid and south Essex: MEHT, BTUH and SUHFT;

hereafter collectively referred to as “the MSB Trusts”. The Strategic Case is the first

of the three stages set out in NHSI’s transactions guidance1 and approval is required

by NHSI for the Trusts to proceed to develop the Business Case (Stage 2) before

approvals (Stage 3).

2.2. Overview of the Trusts

This section provides a broad overview of the three NHS Trusts, including:

geography covered, population demographics and health outcomes, activity, quality

as indicated by the Care Quality Commission (CQC) and current financial position.

Further detail is provided on the financial position of each Trust in section 6.

Mid Essex Hospital Services NHS Trust 2.2.1.

MEHT principally provides services for over 380,000 people living in and around the

districts of Chelmsford, Maldon and Braintree (including Witham). MEHT also

delivers specialist services in plastics and burns across the mid and south Essex

region. All three boroughs are less deprived than the England average, however

there are small pockets of deprivation bordering affluent areas, with the starkest

implications of this seen in Maldon, where there is a 6.8 year difference in life

expectancy within the area. Overall however health outcomes are better than the

national average; with Mid Essex residents having lower incidences of lifestyle

associated diseases and a higher healthy life expectancy

MEHT’s received a “Good” rating from the CQC in December 2016.

Recommendations from the CQC inspection included recruiting a paediatric

emergency care consultant and addressing shortages in paediatric registrars in the

emergency department.

1 Transactions guidance – for trusts undertaking transactions, including mergers and acquisitions, 2017, NHS Improvement.

This section sets out:

The purpose of this Strategic Case

An overview of the Trusts

An overview of the Essex health system

The programme infrastructure and scope of work in developing the Strategic Case

21

MEHT is forecasting a net deficit of £(54.9)m for 2017/18 and £(52.9)m for 2018/19.

Further details of its recent financial performance are included in section 6.

Southend University Hospital NHS Foundation Trust 2.2.2.

SUHFT principally provides services for over 350,000 people living in Southend-on-

Sea, Rayleigh, Rochford and Castle Point, making it the smallest of the three Trusts

by coverage. SUHFT is also the mid and south Essex specialist for cancer services.

The Southend Joint Strategic Needs Assessment (JSNA) (2013)2 identifies

significant differences in deprivation across Southend, which is a key determinate of

health and health outcomes. This is likely linked to the disparities in life expectancy

between the most disadvantaged and affluent wards; ranging from 72.4 years to

81.4 years for males respectively. Also significant in Southend demographics when

compared nationally is the disproportionate growth in numbers of elderly, and the

burden of alcohol consumption; both on long term diseases such as hypertension

and events associated with acute alcohol use such as injury and crime. Southend-

on-Sea has a higher rate of hospital admissions for alcohol contributable conditions

than the UK (1967 per 100,000 compared to 1734).

SUHFT saw an increase in both elective and emergency care in 2016/17; with a

1.06% increase in elective care (52,808 to 53,253) and a 2.55% increase in

emergency care (97,954 to 100,455).3 The CQC rated SUHFT as “Requires

Improvement” in April 2018, however the Trust has undertaken measures to address

many of the recommendations made by the CQC previously, particularly in

connection with mixed sex accommodation on the stroke unit, storage of medicines

on the wards, and improving the process for managing medical outliers. A key area

of focus is now on improving RTT performance for surgery and outpatients.

SUHFT is forecasting a net deficit of £(14.8)m for 2017/18 and £(11.1)m for 2018/19.


Basildon and Thurrock University Hospitals NHS Foundation Trust 2.2.3.

BTUH principally provides services for 405,000 people living in south-west Essex

covering Basildon and Thurrock, together with parts of Brentwood and Castle Point,

making it the largest of the three Trusts by coverage. It is also the mid and south

Essex specialist site for cardiothoracic services. The Basildon and Brentwood CCG

(BBCCG) Integrated Joint Strategic Needs Assessment (JSNA) (2015)4 describes

the considerable disparities between the two boroughs that are served by BTUH;

with the larger population of Basildon (~180,500 residents) and Thurrock (~185,000

residents) being more deprived and facing worse health outcomes than the smaller,

more affluent Brentwood borough (~75,600 residents). For example the difference in

life expectancy varies by up to 8 years within the boroughs, however this also

2 JSNA Southend on Sea, 2012 Summary, Southend Health and Wellbeing Board

3 Annual Report and Accounts 2016/17, Southend University Hospital NHS FT

4 Basildon and Brentwood CCG Integrated JSNA Refresh (2015), BBCCG.

22

extends to cancer mortality rates, with 140 per 100,000 individuals dying prematurely

in Pitsea North West (Basildon) compared to only 64 per 100,000 in Tip Cross

(Brentwood).

In 2016/17 BTUH saw an increase in activity with a 1.0% increase in inpatients and

day cases (to 83,383), a 5.7% increase in outpatient consultations (to 134,627) and

a 3.2% increase in emergency care (to 122,040)5. BTUH received a “Good” CQC

rating in May 2016.

The next CQC inspection of core services and the Well Led component at BTUH is

anticipated during summer 2018. Examples of recommendations from the most

recent CQC report that have been subject to remedial measures include improving

medicines management, ward-to-board governance and improving the skill mix and

staffing levels in Critical Care. The internal governance around CQC compliance has

been recently enhanced by the formation of an internal compliance action group

(ICAG). The ICAG ensures that recommendations from previous CQC and other

regulatory inspections are implemented in a meaningful and demonstrable manner.

BTUH is forecasting a net deficit of £(29.5)m for 2017/18 and £(26.3)m for 2018/19.


2.3. Overview of the Essex health system

Success Regime and history of STP initiatives 2.3.1.

The national Success Regime programme was initiated in response to the NHS Five

Year Forward View (5YFV), to support specific areas with deep rooted, systemic

pressure; either with significant financial deficits, service quality issues or both.

Essex was selected as a Success Regime in June 2015 as one of three such

programmes in the country. Following a diagnostic phase, which ran from October to

November 2015, the decision was taken to focus on mid and south Essex, covering

1.2 million people, five CCGs, three acute Trusts, three local authorities, mental

health and community providers.

The ESR was intended to create a whole system plan for the area to both improve

health outcomes for the local population and bring the system back in to financial

balance. For the acute providers, the ESR focused on:

● moving care out of hospital and closer to home

● reconfiguration of clinical services across sites to improve outcomes and ensure a sustainable workforce and

● increasing efficiency and productivity in back office and clinical support services

5 Annual Report and Accounts 2017, Basildon and Thurrock University Hospitals.

23

A key factor in selecting mid and south Essex as a Success Regime site was the

financial position of the area, with the majority of the deficit driven by acute spending.

Local commissioners were also in a significant net deficit position. Further detail on

the current financial challenges is provided in section 6.

The diagnostic review undertaken as part of the ESR found that the challenges

facing Essex were both pervasive and intensifying, system wide and seen across a

range of organisations. These challenges were made more significant due to a lack

of collaboration between organisations. It was also suggested that due to these

interlinked characteristics, there was unlikely to be a “perfect solution”, as all

possible options brought associated challenges of varying impact. Against

the backdrop of these themes, mid and south Essex was found to have the following

specific challenges:

● A clinically and economically disadvantaged acute footprint

● Workforce and talent gaps

● A complicated commissioning landscape

● Protracted decision-making

● Senior managerial/clinical leader capacity devoted excessively to operational needs

● Limited data usage and data sharing

Following the subsequent establishment of Sustainability and Transformation Plans

(STPs) across England in 2016, the work of the ESR was embedded into the Mid

and South Essex STP, with no change to the footprint and governance processes

and with the same focus on improving patient care and bringing about financial

sustainability. The STP also referenced the possibility to develop collaborative

working amongst the MSB Trusts by working as a group. This is in part supported by

the considerable breadth of services provided by MSB Trusts for five CCGs and

three Local Authorities as shown in the following map.

24

Figure 2.1: a map of the Trusts and local commissioners

Development of the current group model and joint venture 2.3.2.

Original vision for the group model and what it would enable

In order to help deliver the aims of the ESR, the MSB Trusts jointly explored options

for collaborative working, including the commissioning of external legal advice where

required. The MSB Trusts agreed to enter into a contractual joint venture (CJV) and

collaborative governance framework with effect from 1st January 2017, as a part of

an interim group structure (the ‘MSB Group model’). The development of the CJV

was the culmination of extensive discussions between the Trust boards throughout

2016.

The MSB Group model was considered as an interim measure, while longer term

options, including a merger, were being considered. This was due to the work

required on integration planning and the time it would take to gain approval from

regulatory bodies including NHSI and the CMA for more substantial organisational

change. The CMA indicated it would not carry out a review of the group structure at

that stage, on the basis that a proposal for the longer-term solution would be

submitted for review at a later date.

The MSB Group model has the following contractual objectives:

● enable and implement the redesign of key pathways and reconfigure clinical services, subject always to commissioner engagement and consultation duties, with a view to improving care by moving care out of the hospital and

25

closer to home, greater use of technology and self-care and reduction in routine follow-up in outpatients

● increase planned efficiencies and productivity by creating single teams across the MSB Trusts to improve outcomes and ensure a sustainable workforce

● ensure that the MSB Trusts are closely aligned, to improve communication between the Trusts and to enable close working so as to implement changes and improvements in services

● provision for the sharing of risk and financial burden associated with changes between the Trusts6. It is noted however that in practice the individual operational, workforce and financial pressures on each organisation has made these arrangements unfeasible.

The existing model specifies a dispute resolution procedure between the MSB Trusts

and clauses around:

● confidentiality and information sharing between the providers and to external parties

● the handling of incidents, complaints and investigations; and

● staffing and pensions

There is also a collaborative governance framework proposed to assist in achieving

the objectives of the three Trusts. As a part of this framework, a governance

structure has been agreed, as set out in the figure below.

Figure 2.2: MSB Group governance structure

6 As per the Heads of Terms of the Group contract document.

26

The JWB meets on a monthly basis, comprising the Success Regime Committees

(SRC) of each Trust meeting in common. Each SRC comprises all members of the

joint executive group (who are executive directors on each Trust Board), the Chair of

each Trust and two non-executive directors from each Trust.

Each SRC makes its own independent decisions in accordance with the Scheme of

Delegation of the respective trust, following debates in common with the other

Trusts’ SRCs. Each SRC reserves the right to determine particular decisions alone if

doing otherwise would compromise the directors’ fiduciary duty to act in the best

interests of their respective sovereign Trust. There is a clear schedule of decisions

reserved to the Boards of each Trust which require consideration by the full Board of

each Trust.

There are also arrangements for the finance, quality and patient safety, and

remuneration/nominations committees of each Trust to meet to transact their

business in common. These committees in common have met on an approximately

quarterly basis since January 2017.

Development of plans for clinical reconfiguration 2.3.3.

In early 2016, it became increasingly clear that in order to deliver the benefits of the

ESR/STP there was a requirement for some form of collaborative management and

governance arrangements, which would not compromise the ability of the three

Trusts and their boards to deliver their individual responsibilities as sovereign

statutory organisations. As such, all three Trust boards agreed to form the Acute

Joint Working Steering Group which commenced meeting in April 2016. The steering

group comprised of the Chair, Chief Executive and one non-executive director from

each trust. The group met monthly from April to December 2016 to provide a forum

to explore opportunities for joint planning across the three Trusts, build relationships

and develop a collaborative culture between the three Governing bodies.

Concurrently, the five CCG’s within the STP footprint (BBCCG, CPRCCG MECCG,

SCCG and TCCG) established a Joint Committee and as part of the STP a PCBC

was completed in September 2017, which outlined the CCGs’ proposed changes to

the way local health and care services and acute services are delivered. These

proposals support the three main aims as laid out in the STP:

● Invest in innovation and expertise that can help people stay well for longer

● Integrate services to provide more care closer to people and where they live

● Redesign hospitals to meet rising demands with the best quality emergency and specialist care for everyone who needs it

During the process of the engagement prior to the consultation and during the consultation itself plans evolved to respond to key observations made by staff, patients and the public, including the move away from initial proposals to reconfigure A&E sites across the three hospitals.

27

2.4. The vision for joint working

Through the joint working arrangements currently in place, the three Trusts have

collaboratively created four shared vision statements:

● A health network that delivers excellence in local and specialist services

● Demonstrably improve the health and wellbeing of our communities

● Provide a vibrant place for staff to develop, innovate and build careers; and

● Service and financial sustainability and resilience

These statements provided the guiding principles for the existing Group Structure,

however as illustrated in section 3.3.5, the Group Structure has fallen short of being

a robust enough vehicle to deliver on all of these intentions. It is now the opinion of

the MSB Trusts’ that this vision and its associated strategy and benefits can only be

achieved through a merger; see section 4. The Strategic Case lays out the rationale

and support for this view. This is aligned to the STP ambition as shown in the figure

below.

Figure 2.3: the proposed five year ambition for the STP

28

In May 2017, the Joint Working Board held a dedicated strategy session to consider

a five year ambition and objectives for the collaborative working between the Trusts

within the STP. The outcome of the session is below:

Our ambition:

“Create a financially sustainable modern health network that delivers excellence

in local and specialist services that demonstrably improve the health and

wellbeing of our communities and provide a vibrant place for staff to develop,

innovate and build careers.”

Delivered by:

1. Leading the reform of clinical services

2. Radically rethinking and redesigning our corporate & clinical support services, including our patient interface/business support activities

3. Establishing a culture of high performance, improvement, measurement and innovation through a highly engaged workforce

4. Reforming our physical and technological assets to deliver value

5. Becoming a commercially astute, partnership focused organisation

The ambition and objectives will be revisited by the Joint Working Board during

2018/19. This will ensure that the collaborative work remains focussed upon the

evolving priorities and will be instrumental in helping to define the culture and

priorities of the Merged Trust.

2.5. Programme infrastructure and scope of work

The development of the Strategic Case has been driven by the Future

Organisational Form Delivery Group (FOFDG), which is led by the Programme

Director and comprises workstream leads and external support as shown in the

following figure. For details on proposals for the next phase of work, following

approval of the Strategic Case, see section 8.

29

Figure 2.4: Governance structure for the development of the Strategic Case

The membership of the relevant groups is summarised in the following table.

Programme Board

Delivery Group

Joint Working

Board (JWB)

Performance

and Analytics Communication

Strategic Case

development

Clinical Strategy

and Benefits

Case

Finance Governance Estates

MEHT Board SUHFT Board BTUH Board

30

Table 2.1: Membership of the principal groups and boards involved in the development of

the Strategic Case

Group/board Membership

Joint Working Board (JWB)

● The Chair from each Trust

● 2 NEDs from each Trust

The following group positions:

● Chief Executive

● Chief Finance Officer

● Chief Medical Officer

● Chief Nursing Officer

● Chief Transformation Officer

The following non-voting members:

● Chief Estates and Facilities Officer

● Chief Information Officer

● Chief Human Resources Officer

● Managing Director of each Trust

Programme Board

● Non-Executive Directors

● Chief Executive Officer

● Deputy Chief Executive Officer

● Chief Finance Officer

● Chief Medical Officer

● Project Director

● Director of Strategy

Delivery Group Chaired by the Programme Director with executive leads for each work-stream.

Supported by KPMG and Addleshaw Goddard.

The Delivery Group meets on a weekly basis and the Programme Board meets each

month, scheduled to allow timely assurance to the Joint Working Board. Both forums

commenced meeting in January 2018. At each of the monthly Joint Working Board

meetings (in public), assurance about the progress being made is challenged or

confirmed. Monthly meetings also provide an opportunity for key decisions to be

made and risks to be assessed and managed appropriately. The governance

structure for the proposed transaction includes regular transparent engagement with

the governors of the two Foundation Trusts and the Patient Council of the NHS

Trust. Details of stakeholder engagement can be found in section 7.

Extensive engagement with staff, patients and external stakeholders was undertaken

during the development of the Strategic Case.

31

3. Strategic rationale

3.1. National context

In recent years, there have been substantial changes to demand for healthcare and

resources available to the NHS in providing care to the national population. Demand

for non-elective care nationally has significantly increased, with long-term medical

care becoming more common for an aging population and where long-term

conditions are becoming more prevalent.

Nationally, the headline NHS provider deficit reduced from a reported £2.5 billion in

2015/16 to £791 million in 2016/17. However, given the non-recurring national

monies and the cost saving requirements of more than 4% per annum, the

improvement is not necessarily sustainable in future years. Projections of future

years suggest that, even under optimistic assumptions for inflation and continued

high levels of savings, NHS providers will continue to run a large collective

underlying deficit until at least 2020/21.

Part of the system’s approach to dealing with these national pressures was the

establishment of 44 Sustainability and Transformation Plan (STP) footprints across

England. These regions were tasked with developing local plans across health and

social care organisations to improve services for patients and the financial

sustainability of each local system. As described in section 2.3 the STP for mid and

south Essex was built on the foundation of the pre-existing ESR process. These

STPs are now expected to develop into Integrated Care Systems (ICS) to deliver the

aims of the Five Year Forward View. It is therefore critical that the Trusts develop

integration plans for delivery that are consistent with the plans of the STP through

close collaboration with other health and social care organisations in the system.

There is a national staffing shortage affecting all clinical staff. This is due to

difficulties in recruitment and retention and is exacerbated by a large proportion of

the workforce reaching retirement age over the next 5 years. In Q3 2017, there were

87,964 advertised vacancy full-time equivalents in England; the highest percentage

of which were for Nursing and Midwifery Registered staff. The previous year had a

similar level of vacancies. These pressures have resulted in local impacts; with each

MSB Trust having concerns raised by recent CQC inspections over staff shortages.

Action is already being taken to manage these issues. For example, BTUH’s most


National and local pressures on the Essex health system

Trust specific challenges, including the limitations of the Group model

How the proposed merger will address these challenges

32

recent CQC report highlights the investment in developing general medical staff as

an innovative response to the shortage of emergency department medical staff.

3.2. Local context

As set out in section 2 there has been a history of challenges facing the local health

economy in mid and south Essex as recognised in being one of three regions

nationally identified as facing specific system challenges (i.e. the ESR) . The Trusts

are now looking to address these challenges through a series of proposed service

reconfigurations as set out in the PCBC.

Summary of proposed reconfiguration plans as they relate to the Trusts 3.2.1.

The PCBC outlines the proposed reconfiguration of services to support delivery of

the Mid and South Essex STP. This reconfiguration is based upon five main

principles;

● The majority of hospital care will remain local and each hospital will continue to have a 24 hour A&E department that receives ambulances;

● Certain more specialist services which need a hospital stay should be concentrated in one place;

● Access to specialist emergency services, such as stroke care, should be via your local (or nearest) A&E for assessment and treatment, before transfer to a specialist unit if required;

● Planned operations should, where possible, be separate from patients who are coming into hospital in an emergency;

● Some hospital services should be provided closer to you, a home or in a local health centre.

In addition there is an ambition to develop emergency care hubs at each hospital site

to deliver better, faster and safer care for patients at the front door through an

integrated approach in partnership with local health and care: GP streaming,

ambulatory care, diagnostics and dedicated discharge co-ordination.

These principles reflect local requirements, clinical best practice and national

guidance. For example, consolidating specialist expertise and services has been

shown nationally to raise standards and patient outcomes. This is happening locally

in the form of the existing centres of excellence across the three hospital sites:

● The Essex Cardiothoracic Centre at Basildon Hospital

● The Cancer Centre at Southend Hospital

● The St Andrew’s Plastics and Burns Centre at Mid Essex.

The volume-outcome effect in specialised medicine is supported by a large, high-

quality evidence base. This has been shown to be true for a range of treatments and

procedures, including; Stroke, Cardiology, Trauma and Orthopaedics and Cancer.

Acute Specialist Trusts have also historically scored higher on the Family and

Friends Test than Acute Trusts. For example the July 2017 Essex Cardiothoracic

33

Centre report that indicated higher than national average hospital survival rates

(98.4% against England’s 97.8%) and half the rate of cancellations (5.6% against

11.2% for England).

Under the reconfiguration this consolidation of specialist services will be expanded to

cover more specialities to improve quality and efficiency. This consolidation of

specialist expertise locally affords the opportunity for further sub-specialisation.7 By

adopting this approach to a wider number of specialities, mid and south Essex will be

able to provide care through a network of specialists; ensuring patients are seen by

clinical teams with the right expertise to meet their needs, regardless of their

geographical location. The consolidation of services also facilitates the availability of

seven day senior cover. This model does not extend to the Emergency Departments,

which will continue to be provided at each hospital in recognition of local feedback

during the preliminary consultation.

Outpatients, diagnostics and day cases will also continue to be provided at all three

sites. Additionally the majority of Paediatrics, Women’s and Older People’s services,

will be provided at each local site, with only the most specialist cases transferred to

an alternative site. The outcome of these principles are the proposed acute service

reconfiguration clinical model outlined in the diagram below.

7 Summary of Clinical Evidence, Supplementary information for discussion and feedback during public consultation from 30

November 2017 to 9 March 2018, Mid and South Essex STP (2017).

34

Figure 3.1: Overview of proposed acute clinical model

Therefore, under the proposed reconfiguration (and subject to the public

consultation), 98% of core services will remain at their current location; with 100% of

Walk-in A&E and Ambulance A&E attendances staying local. Where emergency

patients are assessed as having improved outcomes with specialist care, they will be

transferred from their local A&E to a specialist unit. For elective patients, an average

of 14 patients per day may receive their inpatient care at a specialist unit rather than

their closest hospital. For these patients, between 12-32 minutes will be added to

their journey.8

Patients already transfer between our hospitals, with support to stay clinically stable.

At the moment this is around 14 patients per day, including transfers with Essex and

to emergency specialist services in London and elsewhere. We propose to build on

this to manage potential transfers between the three main hospitals in Southend,

Chelmsford and Basildon.

Access to specialist emergency services, such as stroke care, would continue to be

via a local (or nearest) A&E, where patients would be treated and, if needed for the

best outcome, transferred to a specialist team which may be in a different hospital. .

Treat and transfer ensures patients are stabilised, assessed and treated by the most

8 Sites and travel time analysis, PCBC (2017)

Mid Essex Basildon & ThurrockSouthend

Urgent and Emergency Care

GP Streaming, 24/7 Emergency Department, Ambulatory units, Mental Health Presentations

Inpatient

Critical Care, Local Paediatrics (except complex), Local Maternity and Obstetrics, Local frail elderly patients (except

in complex cases), Local Speciality (except in complex cases)

Outpatient, Day Case and Diagnostics

Local Outpatient Speciality Clinics (e.g. dialysis), Day Case, Routine diagnostics

Emergency Elective Emergency Elective Emergency Elective

Specialist Stroke Unit

+ Stroke Unit

Complex Respiratory

Trauma

Complex Renal

Vascular

Cardiology

Cardiao and Thoracic Surgery

Stroke Unit

General Surgery Complex

Upper and Lower GI Surgery

Burns and Plastics

Oral-Maxillo-Facial/ENT

Trauma Orthopaedics

Urology Benign Urology

Clinical Oncology

Medical Oncology

Orthopaedics

Complex Gynaecology

Stroke UnitComplex Gynae

Cancers

Complex Uro.

Cancers

Co

re s

erv

ice

s a

t a

ll th

ree

site

sC

on

so

lida

ted s

erv

ice

s

Typic

ally

com

ple

x c

ases

Key: Core service Change No Change

35

qualified, specialist as soon as possible. The teams in all three A&Es would be

equipped and able to diagnose and stabilise your condition and initiate treatment

before the transfer. This not only ensures the best possible care but also that those

with a complex or deteriorating condition are seen by a specialist much sooner.

Of the 960 or so people that attend our A&E departments each day we estimate that,

as a result of the proposals we have developed, around 15 people may need a

transfer to a dedicated specialist team in another hospital. In general, this will be for

people who will benefit most from complex specialist care to recover from their

illness. For example, patients diagnosed with an NSTEMI heart attack should be

treated urgently by a cardiologist before being transferred within 72 hours to a

specialist cardiac centre for coronary angiography with or without stent insertion.

Figure 3.2: Treat and transfer and elective inpatient movement between the three Trusts.

In summary, 99% of the local population is within 45 minutes of their nearest hospital

by car. For patients and visitors that are referred to an alternative hospital, they will

face additional travel times of between 12 and 32 minutes, depending on their origin

and destination location. This covers the three main Hospital sites, however there

are seven other key facilities operated by the MSB Trusts and therefore the impact

on travel times will be considered for each relevant service.

Next steps for the clinical reconfiguration 3.2.2.

Following the formal public consultation, the results were collated and prepared for

analysis by the STP Programme Office and have been submitted for analysis by an

independent review body. A final report on the consultation outcome will then be

presented to the CCG Joint Committee for consideration. This report will inform the

Decision Making Business Case (DMBC) which will be submitted for approval by the

CCGs’ Joint Committee, currently scheduled for 6th July 2018.

The consultation proposals and process have already been presented and reviewed

to a Joint Health Oversight and Scrutiny Committee formed of the Health Oversight

36

and Scrutiny Committees of Essex County Council, Thurrock Council and Southend

Council, alongside other partners such as the Healthwatch organisations of Essex,

Thurrock and Southend. Recommendations made during this process were used to

inform the consultation, including the provision of additional supplementary

information and additional promotional and consultative activities within local

communities across mid and south Essex.

The final proposed changes, alongside the response to the current

recommendations made by the Joint Health Overview Scrutiny Committee and other

partners, alongside the findings of the independent analysis of the public

consultation feedback will also be reviewed by the Joint Health Overview Scrutiny

Committee once it has reformed following the local elections being held in May.

3.3. Challenges faced by the Trusts

In addition to the national and local challenges outlined in section 3.1 and 3.2, there

are specific and unique challenges for the MSB Trusts, including clinical, financial

and operational issues that are outlined below in further detail.

Clinical sustainability 3.3.1.

The MSB Trusts face a number of inherent, clinical challenges due to their

geographical location, historical staffing issues and the highly varied demographics

that they serve. The ability of each Trust to manage these pressures has been mixed

and there is resultant variance in quality across the Trusts. These challenges are set

out below.

Operational challenges against national targets and quality standards

While each MSB Trust evidences excellent quality of care in certain areas, there is

variation between the Trusts and areas in which the Trusts’ performance is below the

national average. More broadly, despite improvements in recent years, there

continues to be areas where mid and south Essex performs in the lowest quartile

nationally. These include:

● standardised hospital mortality rates

● Percentage of patients admitted, transferred or discharged from A&E within 4 hours

● Percentage of patients with an urgent GP referral for suspected cancer having first definitive treatment within 62 days

The table below sets out key quality standards and the Trust performances against

national averages. This demonstrates a significant improvement opportunity that can

be realised through working together and pooling resources to offer the best to

patients.

37

Table 3.1: Trust performances against national average

Metric MEHT SUHFT BTUH Nat.

average

COQ Rating Good Requires Improvement

Good NA

Staff recommendation of the organisation as a place to work or receive treatment (1-5) (2017)

3.75 3.57 3.75 3.75

Family and friends test: Inpatients (Jan 2018)

93% 91% 95% 96%

A&E 4 hr performance (March 2018)

79.3% 78.9% 81.0% 84.6%

% of patients not treated within 29 days of a cancelled operations (Q3 2017/18)

7% 11.3% 1.6% 7.3%

62 day wait Cancer target (Feb 18)

66.67% 71.17% 64.42% 80.96%

Delayed transfer of care per 100,000 (Jan 2018)

12.6 27.3 18.8 36.5

Referral To Treatment (RTT) time

Unavailable* 84.9% 82.5% 92%

Patient assessed for blood clots 97.4% 98.4% 98.7% 95%

New complaints per 10k finished consultant episodes

92.8 87 63 37.9

Summary Hospital-Level mortality indicator (SHMI)

1.10 1.13 1.07 1.0

*MEHT is not currently reporting Referral to Treatment Time

Sources: Collated from publicly available data; NHS Open Data 2017, NHS Choices, 2017 Staff Survey, Hospital Episode

Statistics (HES), NHS Digital Data accurate at March 2018.

Variations between the Trusts in CQC ratings

BTUH is the highest performing acute of the three, with SUHFT performing the worst

in comparison. Both MEHT and BTUH currently hold a “Good” rating from the CQC,

while SUHFT received an overall rating of “Requires Improvement” rating in 2018,

although there was improvement recognised since the last report, particularly in

relation to the well-led criteria which is now rated as “Good”. The responsiveness

area remained as “Requires Improvement” and the RTT performance in surgery and

outpatients was highlighted as an area for improvement. The Trust is now focussed

on addressing the specific areas identified by the CQC and closer collaboration

between the three sites would give an opportunity to standardise and improve the

38

rating across all sites as well as to pool resources to improve against RTT (see

section 5).

Table 3.2: Summary of CQC ratings across the MSB Trusts

Criteria MEHT SUHFT BTUH

Well-led

Caring

Safe

Effective

Responsive

With two of the three Trusts scoring “Requires Improvement” for Safety, there is

considerable effort at both MEHT and SUHFT to address the concerns raised in the

most recent reports. These are set against a backdrop of increasing demands on the

Trusts including the worst winter performance nationally on record, implementation

of new ways of working and national strategy developments.

Workforce and talent gaps

Workforce challenges have strained the ability of the Trusts to provide high-quality,

sustainable services, as staff recruitment and retention have been areas of concern

for all three Trusts in recent years.

Staff recruitment and staff ratio was identified by the CQC as an issue at both

MEHT9 and SUHFT10, with staff shortages also cited as the reason for incidents not

being reported correctly and mandatory training not having been completed, with the

knock on effect and potential implications for patient safety being highlighted.

There are numerous initiatives underway to address this issue, including expanding

the role of support workers to include more caring responsibilities and enhancing

their technical skills. This not only provides improved support to the registered

medical workforce, but allows the medical workforce to take on more advanced roles

too. An example of this is Advanced Nurse Practitioners (ANPs) leading long term

condition management programmes.

Locally, following the opening of the Medical School at the Anglia Ruskin University,

it is also hoped this will attract junior doctors to the area, buoying the availability of

9 Mid Essex Hospital Services NHS Trust Quality Report, CQC, 2016.

10 Southend University Hospital NHS Foundation Trust Quality Report, CQC, 2018.

39

junior doctors in the short term and enhancing the reputation of Essex’s medical

workforce in the longer term future.

Financial sustainability 3.3.2.

The Trusts have faced financial pressures due to changes in funding not matching

the needs of the increased demand. As set out in section 2.3, the MSB Trusts were

prioritised nationally for support through the Success Regime in 2015 due to their

significant financial deficits.

At present the three Trusts are currently operating at a significant net deficit, with the

outturn for 2017/18 forecast to be £(54.9)m at MEHT, £(14.8)m at SUHFT and

£(29.5)m at BTUH. All three Trusts either met or were close to meeting their control

totals in 2015/16 and 2016/17, however only SUHFT is forecast to meet its control

total in 2017/18. This drop in financial performance at MEHT and BTUH relates to a

number of areas including agency spend, negative income variance arising from a

mediation process with local CCGs, operational issues affecting activity, and

underperformance on CIP.

The deficit at MEHT relates, in part, to its PFI scheme. This ‘structural’ element to

the deficit is estimated to contribute £14m to the trust’s annual net deficit.

Estates challenges 3.3.3.

The size of the estate is comparable across the three Trusts as shown in the table

below.

Table 3.3: overview of the size of the estate at each Trust

Metric Southend Hospital

Basildon Hospital

Broomfield Hospital

Gross internal area (m2) 95,832 107,143 90,510

Occupied floor space (m2) 93,037 104,226 90,384

However the profile and quality varies significantly, for example with both MEHT and

BTUH scoring less than 75% on certain patient experiences scores relating to the

environment such as for dementia patients , whilst MEHT specifically has a high

level of critical infrastructure risk (~£12m) and backlog maintenance. The Broomfield

Hospital run by MEHT has the highest proportion of new estate with a PFI wing

opening in 2010 whilst the majority of the SUHFT site (57%) is from 1974 or before.

ERIC data indicates that the three Trusts have varying challenges across their estate

with some empty space at SUHFT (2.2%) but limited space at BTUH (0.3%),

although it also has a relatively high proportion of non-clinical space (41% compared

to 35% at SUHFT and 27% at MEHT). This means that proposals for service

reconfigurations need to be carefully managed to ensure that competing priorities for

consolidation of services does not result in an undeliverable estates plan. This has

40

led to proposals to develop an overarching masterplan for the three Trust sites and

to align this with the latest service reconfiguration plans following the consultation

process.

In addition there continues to be a significant growth in demand for acute hospital

services that even after delivering commissioner schemes to move care out of

hospital is expected to see A&E attendances grow by over 10% in four years across

the three sites from 325,000 in 2016/17 to 358,000 in 2020/21.

Some of the key estates challenges facing the Trusts as standalone organisations as

well as part of the service reconfiguration proposals would be addressed through the

planned £118.1m of capital investment for the three Trusts that was secured through

a capital bid as part of the STP Capital Fund process. At the time of writing the terms

of the STP Capital Fund are not known but the interdependencies between that

funding and the delivery of benefits is set out in section 4.5 and section 8.

Information and data usage and sharing 3.3.4.

The individual Trusts currently operate a range of different IT systems. For example,

SUHFT and BTUH use the Medway Patient Administration System (PAS), whereas

MEHT uses Lorenzo. There are further inconsistencies in the implementation of e-

prescribing, single patient view, application links to the central master patient index

and system documentation. The MSB Group has undertaken a review of IT systems

across all Trusts, supported by Accenture, and has developed an overarching IT

approach for the Trusts. This sets out the principles and areas of focus that will

underpin new digital framework and strategy.

Successes and limitations of the Group model 3.3.5.

As set out in section 2.3.2 there is now a track record of partnership and

collaboration between the MSB Trusts, and this has been leveraged through the

Group model and the creation of a joint leadership team in the form of the JWB and

JEG – including key joint executive roles such as CEO, Chief Medical Officer, and

CFO.

Group Model Successes

The operation of the MSB Group model has had a number of successes since its

formation in 2017.

The JWB and JEG have enabled a shared vision across the Trusts, and in turn

facilitated planning in specific specialty areas for changes that can be made to

benefit patients. Many of these changes rely on closer collaboration as a necessary

initial step to improving services. As an interim measure, the MSB Group model has

provided the catalyst for closer working between Trusts, and planning for change

aligned to the shared vision for the MSB Trusts.

41

For example, the Group model has facilitated discussions and plans in paediatrics

and urology, including early conversations on the practicalities of integrating

functions. In the case of paediatrics, there has been significant scoping and

diagnostic work undertaken on the opportunity to reconfigure paediatric services

across the three Trusts as a part of the MSB Group. In the case of the urology

service reconfiguration at the MSB Trusts, clinicians are in agreement on a model of

care across the Trusts, with clearly defined pathways, and have been working on

developing a new model for this specialty since around the time of the creation of the

Group model. There has also been involvement from multiple CCGs relating to plans

in urology, though formal contract variations have yet to be agreed. However, the

early plans on urology have also shown the difficulties of the group model with

misaligned incentives remaining whilst the Trusts remain as separate statutory

organisations and causing blockers to improvement in care.

Additionally, the Group model has enabled the MSB Trusts to assess and support

proposals by local CCGs for service changes as per the PCBC. These

reconfiguration proposals include the creation of emergency hubs, as well as

reconfiguration of services in a range of specialties including stroke, cardiology,

respiratory, renal, general surgery, gynaecology, trauma & orthopaedics, urology,

and vascular. In summary the current JEG arrangements have provided a valuable

stepping stone in evidencing the benefits of closer working however it has been

unable to deliver the level of collaboration and transformation required.

Challenges/limitations to a Group Model

Despite successes to date the MSB Group model is not sustainable as a long-term

measure. While the MSB Group has made progress on some of its aims, progress

has been slow and it has become clear that the Group model is not sufficiently

efficient and effective to implement change on the scale required. While plans have

been progressed for improved models of care and service delivery, implementation

and agreement of these plans has been limited under the Group model.

For clinical change to be achieved through the MSB Group model, approval and

agreement is still needed from each of the participating Trusts. This leads to

significant duplication of approvals and governance arrangements. There is a

subsequent additional burden on the JEG leadership that is not sustainable beyond

the medium-term, due to the multiple and complex decision-making processes,

extended timescales, and duplicated leadership positions.

Throughout 2017 and early 2018 there has been informal feedback from executive

and non-executive members of the JWB, as well as the site leadership teams, senior

management and governors that whilst the collaborative governance framework has

brought clear benefits, it is also at times difficult to navigate, leading to duplication of

effort and inefficiency. This is largely inevitable due to the need for leaders to

navigate three sets of standing financial instructions and governance structures as

well as three different ways of working.

42

During summer 2017, the Oversight Committee (comprising the audit committee

chairs of each trust) conducted a formal effectiveness review of the collaborative

governance framework, which reported to the three audit committees, Trust Boards

and the two Councils of Governors (of the Foundation Trusts) in autumn 2017.

The review confirmed the informal feedback on the challenges of the Group model,

and made a number of recommendations to improve information flow and

communication, clarify reporting lines and reduce duplication and bureaucracy.

These remedial measures have only provided short-term improvements, given the

ongoing need to service three independent statutory bodies with different ways of

working, whilst needing to work in an increasingly collaborative manner to deliver

service transformation in mid and south Essex.

Additionally, the MSB group model cannot unlock the benefits of having a combined

workforce across the three Trusts, and as such does not provide one of the key

enablers of substantial reconfiguration and clinical change: a large and resilient

workforce shared across sites. Indeed, the group model is intended as a temporary

structure meant to facilitate closer collaboration and integration between the Trusts,

so that patients can benefit from a more streamlined approach and efficiencies

ahead of agreement and implementation of any reconfiguration or organisational

merger. It is not a structure that is intended to or is stable enough to last long term.

Furthermore, and fundamentally, under the group model, each Trust remains a

sovereign organisation. Each Trust will have its own incentives and needs, and as

sovereign organisations, each Trust even under the group model is individually

accountable to its Board, Governors and patient populations. These

incentives/needs can be at least to some degree incompatible across Trusts. Where

this misalignment of incentives between the three organisations occurs, as is the

case under the current Group model, some forms of clinical change are not possible

or are unsustainable. The individual accountability of each Trust means that for any

clinical change, each Trust has to assess the impact on its own patients, operations

and finances, which adds significant time and effort to any change being

implemented, even if relevant business cases are approved for all Trusts.

For instance, take a case where all three Trusts offer the same service, but one

Trust has substantially shorter waiting times than the others. If the Trust with shorter

waiting times accepted patients from the other Trusts, this would lead to shorter

waiting times overall across all patients across the three Trusts’ populations.

However, the Trust with shorter waiting times has limited incentive to do so, as this

will worsen the performance metrics against which it is assessed, and hence this

Trust may be hesitant to take on these additional patients under the Group model.

By contrast, under a single sovereign organisation, there would only be one set of

performance metrics against which care provided will be assessed, and hence there

would be an aligned incentive across all sites to provide services at the sites with the

shortest waiting times.

43

In terms of the reconfiguration planning in paediatrics mentioned above, despite

significant work undertaken, there has not been agreement to a clinical

reconfiguration of these services. This is in part attributable to each Trust having a

different paediatric pathway at the front door, differing contracts for payment and

variable community services support across the geographical area – all factors

linked to the Trusts being separate organisations. There would be an intention to

revisit this as a Merged Trust, as part of the clinical reconfiguration, as there is likely

a significant opportunity to develop a consolidated paediatric service for the MSB

Trusts as one entity.

Similarly, in urology reconfiguration, despite substantial work to date, a business

case is yet to be agreed. This is largely due to the MSB Trusts being three different

statutory organisations, meaning that the business case has yet to be agreed. The

value of urology services and the financial impacts of changes in this service have

amplified the challenges in agreeing a business case across all three sovereign

Trusts. Even if agreed, without a unified management structure across the three

organisations, there is a significant risk that the planned change in urology pathway

would not be maintained due to the varying priorities of each of the separate

organisations.

There are a variety of ways in which maintaining separate organisations limits the

scope for collaborative working to provide patient benefits, and hence the MSB

Trusts’ aim is to move to an organisational form that supports these benefits as soon

as is feasible to do so.

3.4. Conclusions for this section

There are significant challenges both nationally and locally in the NHS which are

driving change and innovation. The current Group model and CJV structure have

been developed in response to developing healthcare needs of the local population

as per the ESR and STP initiatives. While functioning of the MSB Trusts under the

Group model has already led to fruitful collaboration across sites, this was never

intended as a permanent solution and does not however overcome many of the

operational, administrative and financial hurdles that prevent alignment of working

and service delivery across all MSB sites.

44

4. Options appraisal process

4.1. Process undertaken to establish future options

Given the direction of travel of the STP, the three Trusts believed that a preferred

solution must enable closer collaboration. We therefore built an options appraisal to

assess the best organisational form for enabling closer collaboration and to

determine if this will address our challenges.

An options appraisal was completed in January 2018 to assess possible solutions to

the challenges outlined above. This exercise included a series of one-to-one

meetings with a range of stakeholders across mid and south Essex. A “Future

Organisational Form Steering Group” was established to review the outputs of these

consultations, form evaluation criteria and develop a feasibility assessment. A

workshop was then convened to identify a shortlist of options and select the

preferred option.

The involvement of a broad range of stakeholders from across the health and care

system was essential to ensure a rigorous and transparent evaluation. Stakeholders

consulted include all members of the JEG for the three Trusts, site leadership teams

for each of the Trusts (including clinical, operational and financial leads), the

chair/deputy chair and other NEDs for each of the three Trusts, governors or

members of the local patient council for each of the three Trusts, NHSI, and the CCG

and STP leads.

The stakeholder engagement generated an initial longlist of 13 options, which were:

1. Keep “Committee in Common” structure

2. Revert to three Trusts and maintain ‘buddying’ arrangements

3. Merge two of the three Trusts (Southend, Basildon & Thurrock, Mid Essex)

4. Merge the three Trusts (Southend, Basildon & Thurrock, Mid Essex)

5. “Vertical integration”/Develop ACO or ACS with GPs and community services

6. Integrate with mental health providers in Essex


How stakeholders across the MSB Trust collaborated to create a long list of options for consideration

The process taken to identify 3 shortlisted options: (i) maintain Committee in Common; (ii) separate and revert to operating as three standalone Trusts; and (iii) merge the three Trusts in to a single NHS Trust

The process and justifications for selecting a merger between the Three Trusts as the preferred option

45

7. Merge with Princess Alexandra Hospital (PAHT)

8. Merge with Colchester Hospital

9. Integrate with other acute providers in other parts of country or even non-NHS /overseas providers

10. Essex “Devo” (e.g. Greater Manchester model)

11. Joint venture model

12. Service chain model (e.g. Moorfields)

13. Outsourcing services (back office to clinical) to one of the providers or a third party

This list was then subjected to a feasibility assessment and later workshop with the

Steering Group to narrow these down to three shortlisted options. This involved RAG

rating each option for viability, in addition to considering whether there were any

additional options to be included or, conversely, if there were other justifications for

excluding an option.

Two options were excluded on this basis; the merging of two of the three Trusts’ and

the formation of an Integrated Care System (ICS or previously described as an

Accountable Care Organisation/ACO) at this stage. A merger between two of the

three Trusts was excluded due to the view that this would undermine the necessary

integration of workforce and services and also because this would create an

imbalance in the local system. The option of an ICS was excluded as although it was

a strategically appropriate long term option, it would be difficult to deliver in the short

term under the current circumstances. For example, the necessary GP engagement

for such a model would be particularly challenging, due to the absence of a larger

GP provider in the area. This was agreed to be an opportunity to pursue alongside

current work. Furthermore it was considered that the transition to an ICS would be

substantially easier with sustainable and stable acute provision in the region, and as

such this should remain the focus at present.

Other reasons for rejection included lack of alignment with the STP (options 7, 8 and

9), poor timing in respect of local changes (option 6, 7), a lack of Council

involvement (option 10), lack of evidence of successful examples (options 9 and 12)

and limited impact on current state (option 11, 13).

4.2. Shortlist options

This left three viable options for the shortlist:

● Maintain Committee in Common

● Separate and revert back to three standalone Trusts; and

● Merge three Trusts into a single Trust

These three shortlisted options were then subject to evaluation against the required

criteria, which was mutually agreed and assigned weighting via stakeholder

workshops at the outset of the options appraisal. These criteria also incorporated the

46

shared vision statements created by the MSB Trusts, to ensure the process

continued to be guided by these mutual principles. Each option was scored out of 10

on its ability to satisfy each criteria (for a maximum total of 80 points), before being

given a weighted score out of 10.

4.3. Assessment criteria and weightings

Table 4.1: Options assessment criteria and weightings

Domain # Criteria Domain

(%) Criteria

(%)

Quality and safety

i Delivery of overarching clinical strategies for the region

25% 12.0%

ii Improved outcomes and experience for those using the service and their families. supported by an evidence base

13.0%

Sustainability i Sustainability of workshop and operation (incl. opportunities for workshop development)

25% 13.0%

ii Efficiency decision-making accountability

12.0%

Deliverability i Regulatory and political barriers and engagement with local community

25% 12.5%

ii Pace, capacity and culture to deliver and the ability to influence and respond to future system changes. To consider a track record of similar approaches working elsewhere

12.5%

Finance i Value for money of any investments made in the short term

25% 11.0%

ii Financially sustainable in the longer term

14.0%

47

A summary of the results of this assessment is shown in the following table.

4.4. Evaluation of shortlisted options

Table 4.2: Summary of shortlisted options evaluation

Option Strengths Weaknesses

Committee in Common

● Some ability to share resources and short term investments

● Limited opportunity to open up available resources across the three Trusts

● Depends on maintaining an additional tier of management, which is considered unsustainable

● Structure creates confusion over responsibilities and accountability

● Not financially sustainable in the long term

Three standalone Trusts

● Removes the additional tier of management from the JEG

● Does not fit with the collaborative vision for future

● Creates boundaries to seamless patient care

● Systemic workforce issues

● Requires a larger number of experienced management

● Not currently financially sustainable or in the long term

Merge three Trusts

● Best place to deliver the strategic aims of the area and 5YFV

● Workforce opportunities; movement, rotas, pay, career

● Simplifies decision making processes

● Workforce disruptions during transition

● Substantial short term costs, but long term opportunities

The evaluation clearly identified a merger between the three Trusts as the preferred

option, with this option achieving a weighted score of 6.2 out of 10, compared to 3.5

and 3.0 for the Committee in Common and Three Standalone Trust options,

respectively. This is in respect of the alignment to local and national strategy and the

numerous opportunities for staff and improved patient care it affords, partnered with

the minimal weaknesses of the option; which are focused on the short term. It is also

48

the only option that delivers radical enough change to the status quo; simplifying

decision making capabilities, removing boundaries and reducing inequalities

between Trusts to improve patient outcomes and delivering the joint vision.

4.5. Support for preferred option

By ensuring broad stakeholder representation, including members from each CCG

and also colleagues from NHSI at both the feeder workshops and the appraisal

workshop, the group was satisfied that a fair and rigorous process had been followed

to arrive at a decision. Following the consensus on the preferred option of a merger,

this was then communicated to each of the three Trusts for their approval.

Commissioner support 4.5.1.

The five CCGs serving mid and south Essex have expressed strong support for the

merger which has most recently been confirmed in the form of a Letter of Support for

the transaction; see Appendix 2. The CCGs have been kept regularly informed and

engaged as the joint working between the three acute Trusts has developed since

early 2016. Since the CCGs formed a Joint Committee in 2017, much of the

engagement on the clinical service transformation and the move to a new

organisational form has taken place on an STP-level between the “group” of acute

Trusts and the Joint Committee, rather than with individual CCGs.

The main focus of strategic discussions between the CCGs and the acute Trusts

during the 2017/18 year was upon clinical service transformation and the public

consultation that took place between November 2017 and March 2018. Now that the

public consultation has concluded, the level of engagement with the CCGs

specifically on the future organisational form has increased. The Deputy Chief

Executive and Chief Transformation Officer attended the CCG Joint Committee on

6th April 2018 to provide a detailed briefing on the future organisational form project

and the anticipated merger-specific patient benefits. The CCG Joint Committee

expressed support in principle for the direction of travel towards merger and a Letter

of Support will follow the CCG Joint Committee on 4 May 2018.

Further formal and informal engagement on the proposed merger will continue

during 2018/19 between the CCG and acute system leaders, including a “board-to-

board” session between the CCG Joint Committee and the Joint Working Board

during 2018. A letter of support from the CCGs is attached in the Appendices.

Regulator support 4.5.2.

The acute Trusts’ leadership have been engaging with NHSI about potential changes

in organisational form since 2016. From these early stages there has been formal

and informal dialogue with the NHSI Legal Services and Transactions and

Sustainable Solutions Teams. From an early stage, NHSI supported the Trusts’ view

that a change in organisational form would be necessary to fully deliver the benefits

of transformation in clinical and corporate services and to provide a sustainable

future for the acute sector in mid and south Essex. In April 2016, NHSI provided a

49

preliminary competition analysis which was instrumental in the Trusts gaining an

understanding of the scale of the competition issues between the organisations.

NHSI also supported the Trusts by providing independent expert oversight and

guidance on the procurement of specialist project management and legal support to

the future organisational form project in 2017 which led to the appointment of KPMG

and Addleshaw Goddard.

Since the Future Organisational Form Delivery Group was established in January

2018, the NHSI Legal Services and Transactions Team have attended regularly and

provided ongoing guidance and support on the development of the strategic case

and the project overall. NHSI have also provided some dedicated expert resource to

provide advice on the project.

Trust support 4.5.3.

The recommendation from the options appraisal workshop detailed in section 4.1

was presented to a meeting in common of the three Trust Boards on 10th January

2018, at which all three Boards were quorate. Following careful consideration of the

report from the workshop and a debate, there was consensus across all three

Boards that the recommendation of a three-way merger should be adopted. As a

result, all three Trust Boards resolved simultaneously to pursue a three-way merger,

subject to regulatory approval. The Trusts will also consult with the Governors of the

two Foundation Trusts and the Patient Council of MEHT as part of the next phase.

Governor support 4.5.4.

The options appraisal workshop detailed in section 4.1 involved the Lead Governor

(or equivalent) from each site. The Governors have expressed support for the

proposed change in organisational form and an engagement process has

commenced which will be ongoing throughout the life of the project. During 2018/19

a development programme will be implemented to ensure that governors have all of

the information, knowledge and skills required to properly scrutinise and approve the

proposed merger in due course, in accordance with their statutory role in approving

such transactions.

4.6. STP/reconfiguration alignment

The options appraisal process confirmed that a merger between the three MSB

Trusts is the most appropriate solution to address the issues outlined in section 4. A

merger was identified as most likely to deliver better patient outcomes and long term

sustainability, and to address some of the external and internal pressures that have

developed while the system attempted to deliver national strategy. For example the

staff shortages and inadequate staff ratios identified at MEHT and SUHFT can be

addressed by a larger organisation with a larger, unified workforce if the Trusts were

to merge. This provides a larger staff pool to call upon and facilitates more flexible

working arrangements for staff (see further detail in section 5.2.1). The sharing of

resources was hoped to be an outcome of the closer working arrangements provided

50

by the JEG, however this cannot extend to the workforce under the current

arrangements because of the different HR and budgetary processes for the three

Trusts.

Under the new Well-Led Framework for Healthcare Providers, the CQC will be

completing annual assessments of leadership at all healthcare providers as of

Summer 2018. Under the current arrangements, leadership across the three Trusts

is stretched to accommodate the additional burden of the JEG. By assimilating the

Boards at each Trust and the JEG, a new single Trust can strengthen and streamline

leadership across the area.

A merger will significantly improve the financial sustainability of the Trusts. Plans for

improvements in acute clinical services are expected to deliver £19.9m of recurrent

financial savings, with a further £3.9m saving expected from clinical support service

and £8.1m expected from corporate savings. The total benefit is expected to be

£31.9m excluding impacts on STF funding, interest, PDC and depreciation. Further

detail of the financial impact of the merger is provided in section 6.

Further benefits to staff and patients associated with a merger are detailed in

section 5.


An options appraisal process was undertaken between November 2017 and January

2018 to consider the longer term future of the three Trusts. This process involved a

wide range of interested stakeholders and care was taken to ensure that all possible

options were considered. From this process, it was clear that a merger of the three

Trusts was the preferred option. This conclusion is supported by the three Boards,

local commissioners and regulators and we are satisfied that this was a fair and

transparent process.

51

5. Expected benefits and quality impact

The proposed merger enables opportunities for benefits across a wide range of

areas, we have categorised these as:

● Clinical and patient benefits

● Operational and financial benefits to the Trusts

● Staff benefits

● Benefits to the local health economy

These are described in this section, along with the key enablers to the clinical

benefits.

5.1. Approach to identifying and measuring benefits

Benefits will be identified through direct engagement with our staff working within

each service. We will consider improvements in outcomes for those using the service

as well as efficiency improvements from consolidating services. Improvements in

outcomes will be linked where possible to a performance metric (such as waiting

times or mortality) and improvements in efficiency will be linked to the existing cost

base for the service across the three Trusts. In each case a baseline figure will be

recorded that sets out the current projected position for performance and then

quantifies the improvement in that baseline expected as a result of the change. Each

benefit will be assigned an owner from within the service. For further information on

the approach to benefits realisation, see section 8.8.

5.2. Expected clinical and patient benefits

Clinical and patient benefits for the end state Merged Trust will include

improvements to patient outcomes that arise from implementation of the service

reconfiguration proposals made in the PCBC as well as additional benefits identified

following the Consultation. Whilst all patient benefits are relevant to the ‘Business

Case’ for the merger transaction only a subset will be relevant to the PBC that is a

separate document to be submitted to the CMA and sets a series of tests (such as

‘merger specificity’ and deliverability within a reasonable timeframe). Further work

will be done for both of the following as part of the next phase of work, including work


The clinical and patient benefits that are anticipated through a merger

The operational and financial benefits to the Trust

Benefits of a merger for staff and the local health economy

The approach to measuring benefits

The enablers required to deliver the expected benefits, including estates and IT

52

to evidence and quantify the impacts and to determine whether the standard of

merger specificity is met. As a result they are not disaggregated within this section.

Cross cutting benefits 5.2.1.

Whilst the PBC for the CMA is in the process of being developed in consultation with

NHSI, there are currently three main categories of cross-cutting benefits:

● Improved safety and reliability of services through shared best practice and the ability to deliver sub-specialty care models

● Improved access to services through shared resources in areas such as diagnostics or beds; and

● Workforce sustainability and benefits to staff through the ability to jointly develop, recruit and retain staff across the region

Improved safety and reliability

● Decreased mortality and morbidity - Standardising procedures and protocols across all sites in the merged Trust and establishing a single governance framework is expected to lead to a safer environment with less variation in clinical practice and patient outcomes, which in turn would lead to lower mortality and adverse incidents than currently observed. Improving standards in specific specialties, including through reconfiguration will also lead to improved patient safety.

● Other improved clinical outcomes (e.g. infection, re-admission) – the increased workforce and consolidation of specialist activities into more dedicated, specialist facilities following the merger will allow for medical and nursing staff to sub-specialise, and in turn provide higher quality care. Changes planned for orthopaedics services are a good illustration of this cross-cutting benefit. It is also anticipated that the increased opportunities for sub-specialisation, and research are likely to support recruitment and retention of staff. More systematic separation of planned care from emergency care will also enable more effective infection control procedures

● Improved clinical practice – changes in clinical practices through the reliable implementation of national clinical best practice, and good practice from across the sites will drive improved patient outcomes and experience. Changes in cardiology, for example, discussed further below, will remove the need for patients to receive additional invasive procedures

● More reliable access to specialist services 24/7 – access to services as currently configured is not optimising access to specialist care for patients, and the ability to bring teams together and review staffing rotas will help enable changes such as the separation of specialists from generalist on-call rotas, resulting in better access for patients. For example, in interventional radiology there is currently only a 9am-5pm Monday to Friday service for patients at all three Trusts, with no on-call cover, meaning that there is currently a “best endeavours approach” or a reliance on goodwill out-of-hours. The new proposals of a consolidated interventional radiology team across the MSB will see a commencement of a 24/7 shared rota across the three hospitals, ensuring that through a joint service there is always access to specialist support. Whilst the new rota will commence without a merged Trust,

53

there are concerns about the long term sustainability of the change whilst staff work for three separate organisations, due to financial challenges and due to with accountability focussed on the performance of each respective Trust, rather than the Group.

● Quality improvement culture – a standardised clinical governance model and metrics across the three sites, supported by a culture of learning from incidents. Work is already being undertaken to standardise approaches in areas such as mortality, and deteriorating patients. However, for this approach to be successful, it must be supported by a single management structure with clearly defined priorities, and standardised measurement of progress. As such, some standardisation and alignment may be feasible under the Group model and would assist in delivering the PCBC reconfiguration. However, only a merger will allow alignment of clinical governance, metrics and culture across specialties in a way that will benefit patients above and beyond the PCBC reconfiguration

Education and Research - the new medical school at ARU provides the opportunity for the MSB to be the major NHS player in developing and delivering the curriculum, allowing the recruitment of higher calibre staff to deliver training and ultimately enhance local recruitment of doctors. The MSB group with a population of 1.2 million patients will be significantly more attractive to commercial research and should increase research income and research opportunities for patients.

Improved access

The changes to service delivery enabled by the merger will improve access to

services in the region, in particular leading to:

● Improved ambulatory access – the development of “Emergency Care Hubs”, as part of the reconfiguration listed in the PCBC, will enable patients to see the right senior decision maker quicker, reducing the need for admissions and facilitating early discharge for inpatients.

● Shorter time to treatment and waiting times – reconfiguration of pathways and an expanded workforce will allow for patients to be seen more promptly, for instance when being seen for a suspected stroke or when presenting with chest pain. For example, changes planned to cancer pathways illustrates that there are opportunities to improve performance and outcomes for our patients with the standardisation of pathways

● Decrease in disruptions to elective care – changes to delivery of services will enable fewer cancellations of elective care, particularly during winter periods. For example, changes in Trauma & Orthopaedics (T&O) will lead to dedicated facilities for elective patients, as they are separated from emergency care, enabling patient flow to be optimised and mobilised on the day of surgery, reducing infection risk and reducing the need to cancel operations.

● Increased flexibility in choosing appointments – patients will be able to choose to travel further away for their diagnostics and treatments, if there are opportunities for shorter wait times at one of the other sites. This provides increased flexibility for patients that wish to travel, for an earlier, more

54

convenient appointment. This is often not offered to patients currently, as the three Trusts are separate providers, and therefore, the diagnostic is normally assumed to be delivered at the place to which the patient has been referred for treatment. The existence of a single merged Trust will be particularly impactful in enabling this benefit, as IT systems and patient journeys allowing a choice of service delivery sites can be best aligned within the Merged Trust.

● More care delivered outside hospital and closer to home - services will be provided closer to home, in part due to redevelopment of the physical estate of the merged Trust and its partners in the local health economy. In particular, community hospitals will be upgraded and re-developed, including: Thurrock Community Hospital, St Peter’s Hospital Maldon, Braintree Community Hospital, Brentwood Community Hospital, and the St Andrews’ Centre in Billericay. A new elective diagnostic hub is also planned for development following the merger. Changes in IT will also allow greater access to services, as these may allow for more local provision of care, with results or information transferred electronically between a larger site where clinicians can review and make decisions, and local sites where services may be delivered. While some changes form part of the PCBC reconfiguration, the Trusts plan development in other areas where changes are dependent on a merger as well, for instance in ophthalmology

● Care provision at home - IT changes will allow care and monitoring to be provided at home in a range of areas, for example an app for respiratory illness patients has recently been rolled-out (myCOPD). Additionally, further home-based care initiatives will be pursued by the Trusts and will be enabled by the merger. For example the Hospital at Home service currently offered at BTUH will be expanded to cover the entire catchment of the merged Trust, providing patients with the ability to leave hospital faster and receive intravenous antibiotics at home

Workforce sustainability and benefits to staff

The sustainability and resilience of clinical services will be improved by the merger

as it will lead to both a larger pool of both medical and nursing staff, as well as

specific benefits for staff themselves. It will also enable the development of a

common culture and set of values and behaviours to unite the NHS workforce across

the three sites.

For medical professionals the merger will lead to more attractive on-call rotas,

improved training opportunities, greater opportunities for specialisation and sub-

specialisation, rotational posts and additional scope for research activity and

educational opportunities. For nursing staff, the merger will allow a broader range of

wards across which nursing staff can rotate to gain experience, and additional

opportunities to specialise. There are plans as part of the reconfiguration to expand

the numbers of Advanced Nurse Practitioners (ANP), Surgical Care Practitioners

(SCP) and Physicians Associates (PA), as well as an expansion of the Advanced

Health Practitioner (AHP) training program currently run by SUHFT. The emergency

care hub model will also be focussed on up skilling clinical professionals so that they

are empowered to make better decisions for patients in partnership with primary care

55

and other care system partners. The merger will also enable investment in

technological solutions such as shared records and TeleTracking that will make the

working lives of clinicians easier as well as driving improved patient outcomes. In

short the merger will enable a more satisfied workforce, better development and

more rewarding careers. This is important in its own right but also as noted by NHS

Employers “there is a substantial amount of recent evidence that the experiences of

staff, particularly in the form of support received from supervisors and others, and

staff engagement, are associated with the care provided to patients, in the form of

patient satisfaction, health outcomes, and ratings of quality of care, as well as staff

absenteeism and turnover”.11

Collectively this will drive both better recruitment and retention of staff creating

resilience in the services so that we can deliver quality, timely care in an

environment of increasing demand. We will not only remove the resource consuming

competition for staff between three autonomous sites but will also be able to both

retain the knowledge of individuals (organisational memory) and benefit from staff

being able to move seamlessly between the three sites due to standardisation of

protocols and systems. We plan post-merger to build on existing links to Anglia

Ruskin University (ARU), to develop tailored programmes for the development of

local healthcare professionals and the merger will enable resources to be invested

both in developing educational programmes and in releasing staff to attend training.

Speciality specific benefits 5.2.2.

In addition to the cross-cutting benefits described above the following specialties

have been identified where reconfiguration is planned and where the merger will

enable benefits to be delivered in care. Whilst the planning for the reconfiguration of

these services has been enabled by the existing group model structure (see section

3.3.5) implementation of the model in many of these areas is dependent on a

merger:

● Emergency care hubs at all sites offering standardised care commissioned and resourced in a consistent way for patients and staff.

These hubs will provide a wider range of urgent care services, and expertise moving to the “front door” of the Trusts’ hospitals, which will enable us to ensure that the patient sees the right senior decision maker quicker, supporting avoidance of hospital admissions and facilitate early discharge for inpatients. The Emergency Care Hub concept is based on a whole system approach which includes medical assessment unit (MAU), surgical emergency assessment unit (SEAU), paediatric assessment unit (PAU) and frailty assessment unit (FAU), providing

o GP streaming for all walk-ins

o Ambulatory care and short stay services

11

Staff experience and patient outcomes: what do we know?, NHS Employers, July 2014

56

o Diagnostics, observation, treatment, and rehabilitation

o Standardised patient pathways following clear inclusion/exclusion criteria

o Consultant led service with quick decisions

o Dedicated discharge coordination

An example of an ambulatory pathway avoiding admission would be a surgical patient requiring abscess drainage, who would be booked for theatre, and brought back the following day, rather than admitted overnight. Early discharge pathways are also possible, such as, catheterised patients who are not ready to have their catheter removed and would normally remain an inpatient, could be booked for ambulatory review. Early capital investment in each of the three sites will be required to develop the Emergency Care Hubs as this model underpins the releasing of bed capacity, which support speciality reconfiguration.

● Cardiology through colocation with other specialised services (vascular, stroke, respiratory). This will improve the service to non-tertiary patients, by standardisation of pathways across all three sites supported by a single management structure and faster access to specialist treatment. For example, patients at the specialty centres for stroke, renal and vascular which are co- located with the cardiology specialist centre will benefit from interaction and advice from cardiorespiratory specialists as this is a patient cohort who frequently have these co-morbidities. This will reduce length of stay (LOS) and enhance patient experience.

● Renal medicine including an acute renal unit consolidated on a single site allowing access to specialist care 24/7 and the initiation and management of home therapy, remodelling of workforce, specifically in relation to doctors, deanery trainees and specialist nursing. The acute renal unit will enable the collocation of patients, into dedicated renal beds, rather than mixed general medical wards. The consolidated specialist workforce on one inpatient site, will also release senior capacity to support treating patients with chronic kidney disease at all sites, providing earlier intervention, and reducing disease progression.

● General surgery through a single management team to ensure the best use of resources to improve patient outcomes. Consolidated services would mean opportunity to provide sub-speciality on-call for lower GI and upper GI emergencies resulting in improved outcomes through faster access to procedure than is currently achievable.

● Gynaecology through standardised pathways and consolidation of complex gynaecology-oncology patients at one site, will improve oncology outcomes and performance against the 62 day target. Improved access to Early Pregnancy Assessment Unit, with 7 day diagnostic cover, remodelling of workforce and opportunities for consolidation with obstetric services.

● Trauma & orthopaedics changes will include a dedicated orthopaedic ward with a more specialised workforce, resulting in fewer infections, enabling earlier mobilisation of patients and resulting in fewer readmissions. The merger enables the opportunity for dedicated elective capacity across the

57

three sites and removes complex misalignments of incentives in the existing structure. Dedicated elective capacity will also reduce the need for cancellations of elective orthopaedics procedures, particularly during winter periods. In the winter of 2017/18, hundreds of elective orthopaedic procedures have been cancelled across the three Trusts due to non-elective demands. As at December 2017, Basildon’s RTT performance for T&O was 69.1%, Mid Essex was 68.3%, Southend’s 84.4% against a national average of 84.8%. The delays in treatment often result in patients having deteriorated whilst waiting up to 52 weeks for their surgery, and consequently clinical outcomes being worse for these patients who also often have an increased LOS. Dedicated facilities enable patient flow to be optimised and mobilised on the day of surgery, and reduce infection risk and the merger will enable these dedicated facilities to be set up, maintained and operated in a sustainable and resilient manner. Capital funds have been allocated for the first phase of this model to be implemented In 2018/19, with the redevelopment of the Braintree Elective Orthopaedic Centre in the Mid Essex area.

● Respiratory medicine including improved access to complex thoracic surgery within the region and consolidation of pathways, to provide improved access to specialist services such as non-invasive ventilation.

● Vascular through consolidation of on-call rotas and changes to the model enabled by a merger as it will lead to significantly simplified contractual arrangements and improved outcomes. The collocation of vascular with cardiac, renal, interventional radiology and stroke specialities, means that patients will receive an improved holistic treatment, and outcomes, though access to services, that are not available consistently at all three sites.

● Stroke through centralising stroke services at one specialist stroke unit, in line with national best practice, leading to improved mortality rates and reduced morbidity.

● Cancer12 planned outside of the PCBC reconfigurations. Changes should allow more patients to meet the 62-day referral to treatment target for cancer referrals. An example of this would be urological cancers, where the standardisation of diagnostic pathways across the three Trusts, specifically the use of template biopsy, is likely to result in earlier diagnosis, and improved outcomes for patients, as well as improvement in the 62 day target. In January 2018 – 62 day performance across the three sites varied from 88.24%-96.8%, against the England average of 94.42%.

● Ophthalmology where unified management, governance and IT systems at one acute provider will allow care of some conditions to be provided locally by primary care providers, in alignment with acute specialists;13 and

● Hospital at Home services, currently provided at Basildon, will be rolled out across the merged Trust, made possible by the standardisation and improvement on existing models that vary in part due to misaligned incentives

12

Note – this area is not being considered as a part of the Pre-Consultation Business Case, or the ensuing consultation.

13 Note – this area is not being considered as a part of the Pre-Consultation Business Case, or the

ensuing consultation.

58

without a merger,14 These services will allow patients to receive a larger portion of their care at home, reducing length of stay and admission rates, and therefore improving both patient experience and clinical outcomes.

The development of the clinical changes has to date been led by clinicians, in each

specialty area, with a focus on development of the model of care for patients across

the three Trusts in a way which is clinically deliverable and beneficial to patients.

This process ensures that the changes will be realisable and realistic, as well as

ensuring that the necessary buy-in has been achieved across clinical teams to

provide the engagement needed to develop and implement the changes. Alongside

the development of the new service delivery models in individual specialty areas,

clinical teams are engaging in a process to articulate and demonstrate patient

benefits, and to develop compelling clinical evidence for the changes that are being

proposed. Patient benefit is therefore at the heart of the changes that are being

proposed. This is important in order that clinical teams continually challenge

themselves to deliver models which lead to optimal patient benefits, and so that the

patient benefits driving the various reconfigurations being developed can be

explained and evidenced to various stakeholders.

The specialties identified where reconfigurations are being pursued have been put

out to consultation following the PCBC.15 These areas will undergo an information

gathering process whereby templates will be completed by clinicians in each

specialty detailing the planned changes and how they will benefit patients. Some

other specialties16 have not been through the consultation process, but nevertheless

there is still substantial engagement from clinicians in identifying changes and

resulting benefits in these areas. Clinicians that are in the earlier stages of thinking

about how they can reconfigure their services are currently being given the

opportunity to undertake a clinical redesign programme, and undertake readiness for

change assessments, including the collection of baseline data packs, helping to

identify opportunities to work together.

Articulating and measuring the patient benefits associated with proposed changes

also draws on a range of public sources, which inform the process of clinical

development and engagement. This includes CQC reports, national audits NICE

guidance, peer-reviewed clinical research papers, Getting It Right First Time

(GIRFT) data, data on mortality, infection rates and other clinical outcomes, including

that provided via the Model Hospital portal, as well as waiting times and pathway

breach rates which are recorded by the Trusts.

14

Note – this area is not being considered as a part of the Pre-Consultation Business Case, or the ensuing consultation.

15 Specifically, these are the specialties listed in section 1.4, with the exceptions of Ophthalmology,

Hospital at Home, and Cancer. 16

i.e. Ophthalmology, Hospital at Home and Cancer.

59

5.3. Operational and financial benefits to the Trusts

There are a number of operational and financial benefits to the Trusts beyond the

clinical benefits described in section 5.1 and these can be grouped into five areas:

● Clinical research and innovation

● Better support services for lower cost

● Accountability and performance management

● Optimising use of existing resources

● Infrastructure planning and partnerships

Clinical research and innovation

Today’s research is tomorrow’s care. People being looked after in the NHS today

benefit from research that has already taken place and will continue to benefit from

research taking place today. Innovation can allow the Trusts to provide better

services within the same level of resources or alternatively to deliver the same

service with fewer resources – in turn enabling investment in care elsewhere.

As a single organisation serving a population of 1.2 million people, broader reach to

a larger and more diverse pool of patients and wider selection of population groups

for selection would enable more opportunity for research and innovation. A single

organisational research hub and process to the management of clinical trials, service

evaluation and clinical effectiveness would greatly reduce bureaucracy and take

away barriers to recruitment to NIHR portfolio studies, provide more opportunity for

local Principal Investigators, and be more attractive for commercial studies and to

industry. Smoother routes for commercial studies and quicker recruitment from

working as one team will help attract investment from industry and help contribute to

the sustainability of the Trusts.

Through the three-site clinical strategy for the Trusts, the creation of specialist

centres in a number of areas will improve research and innovation opportunities, not

only through increase in volumes within a unit, but also by having better supported

and trained staff who can offer a wider range of treatments and trials. NHS funded

research and innovation, will not only attract financial and patient benefits (patients

treated in research active organisations have better outcomes in general), but is also

likely to support a more sustainable workforce. For example, there is already strong

interest to participate in the 100k genomes project, and the ability to offer this to our

patients when recruiting for cancer services at SUHFT.

The Trusts have already engaged and begun innovative partnerships with a number

of clinical entrepreneurs who have been attracted to us in part because of the ability

to develop and test products in a larger system. Our emerging reputation for

supporting innovation has also helped attract industry partners and possible

collaborators to help provide resource in areas such as dermatology. There are also

60

emerging commercial opportunities for the Trusts in working together with digital and

technological entrepreneurs.

Working together also maximises our opportunities to learn, improve critical mass for

improvement, measurement and innovation, and enable cultural change. The

Merged Trust would provide more chance to reduce barriers to wider adoption of

innovation from pockets of good practice, providing single leadership and oversight,

and enabling connectivity of new digital systems to spread across three sites. One

commissioner conversation to contract and monitor novel approaches will also help

prevent duplicative bureaucracy and improve transparency of success/failure of new

ideas. Our position having three different types of hospital also gives us a range of

circumstances in which to test solutions, and we can also help to understand how

any new products or systems would fit into different ways of working, as well as

learning from the process of scaling and spreading from one site to another, which

we do all the time in other ways. A larger organisation can also have more capacity

and scope to bid for additional investment and enter into strategic partnerships, e.g.

with charities and possibly other sources of inward investment (e.g. grants, national

early adopter programmes, innovation funding).

Better support services for lower cost

The merger will also enable standardisation of operational methodologies and

practices to a common set of standards across supporting services as well as

consolidation of supporting functions. This will provide opportunities for an enhanced

support service to the clinical functions in the three sites as well as opportunities to

reduce the total overhead cost and reinvest more in front line care. There will also be

the ability to more nuanced analysis of benchmarks between the three sites as they

will report service delivery to a common data set, referencing strengths and

weakness in each trust to identify opportunities, both financial and non-financial.

Savings can be made to drive this through the efficiencies of consolidating support

teams and economies of scale, such as joint contracting savings and a single

contract management and performance system to ensure consistent performance in

delivery of outsourced estates maintenance and assurance contracts.

Finally, the corporate workforce will also be made more sustainable in the Merged

Trust as it will be better able to support career development. This will result in better

retention and skills development opportunities, through consolidation of duplicated

roles to allow enhanced person specifications, creating attractive roles to aid

recruitment to key positions; see also section 5.3 in relation to clinical workforce

sustainability.

Accountability and performance management

The merger would remove the complexities associated with having three statutory

organisations and would allow for greater clarity around who was accountable for

performance within each service and on each site. There would be a simpler and

61

formalised integration of accountability of the management of pathways and support

services across the sites with the new organisation. This will include simplified

communications and governance measures for delivering change in a constantly

evolving health system. It would also be possible to improve performance and

compliance monitoring through a common system for improved assurance to senior

management, the Board, and external agencies. This in turn should drive better

performance against KPIs such as waiting times.

Optimising use of existing resources

The Merged Trust could have better management of existing resources around

everything from buildings, to theatres, to beds and diagnostic equipment through a

common system that gave up to date information on availability of assets and the

governance arrangements in place to enable rapid decisions on how best to utilise

those assets. There will then be greater flexibility in access to resources across the

three sites enabling better operational performance for the Merged Trust. This will

also allow for reductions in overall waiting time performance through improved

patient flow.

The additional capacity created through optimising resources will enable the

repatriation of patients from London and other areas, particularly when combined

with the improved services delivered by consolidation of specialities across a

broader population and plans for increased sub-specialisation. Areas of opportunity,

subject to discussion with commissions, include complex general surgery, pain

management, and paediatric specialisms.

Finally there will be a reduced administrative burden from ‘stranded patients’ as far

fewer patients will be classified as out of area by the CCGs. Currently, with the three

Trusts working with five CCGs, and three local authorities, the merger is an

opportunity to rationalise the outflow of patients from the acute setting. This is likely

to support improvement in operational targets, and therefore lead to financial

benefits. It will be achieved through standardisation is ways of working, identification

and advance discharge planning of this cohort of patients.

Better planning around infrastructure and strategic partnerships

A Merged Trust would be able to deliver more strategic infrastructure planning

across the sites on everything from buildings to diagnostic equipment. This would

include the opportunity to rationalise and co-ordinate the estate and key resources to

underpin the currently planned and any future healthcare configuration; including

management of a broader estates portfolio and identification of suitable land

disposals to fund investment in high quality care.

A joint-procurement approach for estates including procurement of standardised

items and the developing a consistent design standards would enable

production/construction efficiencies for a single, merged capital programme;

exploiting partnering arrangements by operating at a greater scale creating an

62

attractive opportunity for the market. The scale of the Merged Trust would also be

greater opportunities for meaningful strategic estates partnerships that enabled the

Trusts to play a leading role in helping the STP to deliver its objectives.

A steadier pipeline of projects and the development of common standards for estates

developments and capital equipment would also allow for a stable supply chain that

in turn would enable efficiencies from the repeatability of projects across three sites.

5.4. Benefits to the local health economy and to commissioners

The benefits of the proposed merger extend to our commissioners and partners

within the mid and south Essex STP area and more broadly to our communities.

The goals of the mid and south Essex STP, as articulated within the PCBC,

alongside the benefits that merger will bring to each of these goals is shown in the

table below:

STP Goal Benefits of merger to this goal

Enables organisations to deliver high quality care for patients and reduce local health inequalities.

As set out earlier within this section, we believe the service changes which are best enabled by merger will improve service quality to patients and reduce existing inequality in service provision as a result of there being three independent trusts within mid and south Essex.

Achieve financial balance, securing sustainable services for the future

As also set out elsewhere within this section, the delivery of financial benefits across the three hospitals will significantly contribution to the overall financial health of our local health and care system, facilitating greater investment in primary and community care which will in turn reduce the reliance on hospital services in the future.

Provide directional clarity to enable organisations to plan over the next five years

The Merged Trust will be better able to engage with system level planning and better able to work with other system partners to effect necessary system and service change to improve outcomes for local communities.

63

STP Goal Benefits of merger to this goal

Build and extend existing strategies / collaborations that are consistent with the Five Year Forward View

The Merged Trust will be able to better support the end of end redesign of pathways across the entire area, standardising to best practice and using the scale of the Merged Trust to effect this change.

Increase the ability of leaders and workforce to make changes and develop other capabilities

The Merged Trust will be better able to develop the specialist resource in quality improvement and change management to equip staff to make changes, both within the Merged Trust but more broadly across our local health and care economy.

As such, we believe that a merger is entirely consistent with the strategic direction as

signed up to by all health and care organisations in mid and south Essex.

In addition to these strategic benefits, there are a number of more tactical benefits

which a Merged Trust would best able to deliver, these include:

● Facilitating a significant reduction in system transaction costs as a result of moving to a single contract with commissioners and single points of contact with other organisations, thereby reducing the need for commissioners and other partners to engage individuals with each trust as at present.

● Reducing commissioning expenditure as a result of the repatriation of activity of care from London as a result of the market forces factor and the current reliance of commissioners on outsourcing to the private sector as a result of the improved efficiency that operating at scale will have in a number of service areas, such as orthopaedics.

● Improving clinical advice and support to primary and community services which can be extended as a result of the creation of single clinical teams and rotas with sufficient flexibility to allow for dedicated hot line, advice and guidance or virtual clinic support to aid patient management which should reduce demand for outpatients and non-elective services.

● Supporting the development of community infrastructure and services.

● Improving external stakeholder engagement as commissioners and social care will only need to engage with one team rather than three organisations in order to co-ordinate the care of patients out-of-hospital.

In addition to the benefits to our local health economy and local health and care

partners, we believe that merger will deliver significant benefits to the broader

communities that we collectively serve. As a Merged Trust we will be one of, if not

the largest employer within Essex generating a significant amount of economy

activity within the Essex economy. As such an ‘anchor’ institution we believe that by

focusing the activities of the Merged Trust in areas such as localised purchasing,

recruitment and investment that we will be able to deliver significant benefits to our

64

local communities. This can and would only be delivered through significant and

deep engagement with local communities that would only be afforded through the

economies of scale that the Merged Trust could bring.

5.5. Key enablers to deliver the clinical benefits

Capital schemes

The three Trusts with the group successfully submitted a joint capital bid for £118.1m

to support estates, digital and other infrastructure improvements to enable the

transformation of acute services. The programme of capital work is being developed,

as per the NHSI business case model including a Strategic Outline Case (SOC),

Outline Business Case (OBC) and Full Business Case (FBC). The development of

the SOC, OBC and FBC will demonstrate the relationship between capital

investment and the patient benefits that are derived from the investment.

The capital case is complex with over 30 individual projects across three Trust sites,

supporting the transformation of services and delivering patient benefits. Continuous

benefits mapping is being undertaken as these projects and the business cases

evolve, and the projects will be grouped to express how projects are thematically

linked to specific benefits sub-sets, for example improvements in emergency care.

Below is a high level summary of where the patient benefit themes are directly linked

to a subset of the overall capital programme, separating out those schemes which

can be included within the Trust’s capital budgets for future years and those that are

dependent on the receipt of STP funding as per the successful bid to the STP

Capital Fund wave 2 in November 2017.

Table 5.1: overview of schemes relevant to patient benefits that whilst part of the STP capital

programme will proceed as early strategic investments

Patient benefit Projects overview Capital investment

Cardiology Interventional radiology £3.5m

IM&T TeleTracking £2.5m

Trauma & Orthopaedics Braintree Community

TAU at SUHFT

£2.1m

Urology Capital £0.5m

OBC and estates strategy development costs £1.8m

Fossetts Farm Disposal (£7.0m)

Total Total £3.4m

65

Table 5.2: overview of the schemes relevant to patient benefit to be funded by STP capital

programme

Patient benefit Projects overview Capital investment

Improved Access Digital infrastructure investment through further investment in TeleTracking and Shared Records Projects

£5.3m

Cancer/Oncology Emergency Care Hubs,

Linac Bunker

Expanded theatre capacity

Vascular Ward

£30.2m Trauma & Orthopaedics

Cardiovascular

Ophthalmology Redeveloped Acute Ophthalmology Facilities at Southend Hospital

£2.1m

Contingency and site infrastructure £8.0m

Total £45.6m

In addition to the above there is approximately £70m of additional capital projects for

the Trust that form part of the STP capital programme (in total the STP capital

programme is £118.1m and this is all included in the financial forecasts set out in

section 6). This remaining balance is to address other strategic issues not related to

the merger specific patient benefits identified in section 5.2 but that are necessary for

the broader Trust transformation agenda. The allocation of individual schemes will

be considered further as part of the next steps described in section 8.For those

capital schemes above where there is a link to the patient benefits, there is an

interdependency between the delivery of the capital programme for the above areas

and the merger itself. This is because the merger will require CMA approval and that

in turn is dependent on showing there are a series of deliverable patient benefits.

This is also set out in section 8 in relation to delivery and programme management.

The development of the capital business cases is also linked to the development of a

joint estates strategy and masterplans for the Trusts, which reflects the benefit of

planning as a single organisation and will result in an estates strategy that builds on

the strength of bringing the three Trusts together, which is described further on. This

will help to ensure seamless delivery and phasing of the multifaceted capital work

stream, both in support of the delivery of patient benefits, broader service

transformation and efficiencies, and better utilisation of the estate.

Additional to the capital business case being developed, the Trusts are already

planning to deliver significant capital investments to enable early projects that

66

support clinical services transition and bring patient benefits, for example additional

Catheter Lab capacity at the Essex CTC and developing additional capacity for

elective Trauma and Orthopaedics at Braintree Community Hospital, to facilitate the

transition to the joint service model.

Technology and IT

As set out above, there will be capital investment in IT as part of the merger.

Technology and IT solutions are expected to be key enablers of sustainability and

access to services and will be used to streamline the sharing of information across

sites ensuring the efficient delivery of services and communications with patients.

For instance, collaborative working between the three Trusts has resulted in the

implementation of a solution for sharing diagnostic images and reports electronically

across the hospital group, enabling improved load-sharing, speeding up reporting of

results for patients and delivering a more sustainable diagnostic service overall.

The three Trusts are currently working on the implementation of TeleTracking to

improve patient flow across all three hospital sites. One of the key benefits of a

Merged Trust is that it will provide real-time visibility of admission numbers, bed

capacity and discharges across all three sites, facilitating opportunities for sharing

non-elective activity.

A technology-enabled, intuitive, common front door for staff (“Support Hub”) will

provide rapid resolutions to incidents and service requests and improve the

knowledge base of support staff, ensuring issues impacting both clinical and

corporate staff are at first point of contact where possible. Work is underway on

achieving a consistent view of patient information which can be safely shared across

the merged hospital group. Existing clinical portals will be extended and new

functionality added, enabling clinicians to access within the patient context across

the Merged Trust using a single log in.

Furthermore the Acute Shared Record will be accessible via a fully supported mobile

platform to support the delivery of patient care at the bedside in real time, driving

forward the digital vision of paper light working. The development of a Patient Portal

will enable patients to take control of their own health and social care, allowing to

remain independent at home and manage their own conditions through the use of

health apps and wearable technologies. The Acute Shared Record will lay the

foundations for an STP shared record which is a key deliverable of the Essex Digital

Strategy, enabling Essex wide visibility of health records leading to better care

outcomes for our patients.


There are significant clinical and patient benefits that will ensue from a merger of the

three Trusts, including higher quality care and improved access to services. Whilst

the existing group model has enabled planning of service reconfigurations, the

misalignment of incentives that remain with three statutory organisations means that

67

many of these programmes cannot be effectively delivered without a merger. The

merger will also generate operational and financial benefits, as well as benefits to

staff and the local health economy.

We have identified an interdependency between the delivery of some of the patient

benefits and capital planning processes that will need to be carefully managed

and aligned.

68

6. Financial assessment

6.1. Current financial position

The proposed transformational changes outlined in this document and the potential

for merger savings demonstrate that the merger will significantly improve the future

financial sustainability of the three Trusts.

The Trusts have been working in challenging systems with operational pressures,

increased patient expectation and activity, as well as CCG financial constraints. The

Trusts’ financial performance against plan has varied over the last three years as set

out in the following table.

Table 6.1: Historical financial performance 2015/16 to 2017/18

£m MEHT SUHFT BTUH

2015/16

Plan (35.9) (7.0) (28.9)

Actual outturn (39.9) (19.5) (26.9)

Variance to control total (4.0) (12.5) 2.0

2016/17

Control total (26.6) (15.7) (15.6)

Actual outturn (24.3) (15.1) (15.8)

Variance to control total after STF 2.3 0.6 (0.2)

2017/18

Control total (24.5) (15.0) (12.6)

Forecast outturn (52.9) (11.1) (26.3)

Variance to control total after STF (28.4) 3.9 (13.7)

BTUH and MEHT are not forecast to deliver their control totals in 2017/18, whereas

SUHFT exceeded its control total. The key drivers of the adverse variance were:


The current financial position of the three Trusts

A projected financial performance of the merged Trust

An analysis of the financial benefits associated with a merger

69

MEHT

● The underlying SLA income position was adverse due to the local CCG arbitration that was upheld in favour of the CCG with a resulting deficit of £4.3m

● Specialised activity and income was below plan for the year by approximately £3m (excluding high cost drugs) with burns income being a significant element

● Further commissioning income and activity was below plan and pressure on Further commissioning income and activity was below plan and pressure on operational management have been experienced throughout the financial year. As a consequence of not achieving financial control totals or delivering an improved A&E trajectory in year, then the Trust was not eligible for STF (£8m), although it did receive STF bonus at year end of £1.8m

● Pay expenditure was over budget against the backdrop of continued operational pressures in ED and with continued additional clinical and medical resource supporting the winter ward, nursing home beds and escalation areas as part of the winter plan

● During the year the level of vacancies continued to increase, driving and impacting on the increased agency spend, such that agency spend was £5.3m above its agency target of £17.5m

● The Trust CIP programme did not deliver the target of £16.5m

BTUH

● BTUH has delivered its CIP plan of £16.5m

● The key issues impacting the BTUH deterioration were in respect of the escalating medical pay above budget and the loss of clinical income against the original plan largely due to lower elective activity than that agreed within the commissioner contracts at 1 April 2017. There was also a need to spend on agency staff due to fill vacancies. The combined impact of these issues was the majority of the adverse £6.2m impact before STF

● The adverse impact against the control total is principally driven by the non-receipt of STF funding through the year (£10.7m), partially offset by STF bonus of £3.1m

The Trusts are working together to ensure that the contractual arrangements with

local commissioners are consistent and more robust in 2018/19, whilst trying to

balance the CCGs expectation of QIPP delivery as well as the aggregate 5.0% CIPs

required by the Trusts to deliver their operational plans. Operational plans were

submitted on 8th March 2018 and discussions are ongoing in respect of the

acceptability to NHSI.

6.2. Assumptions

The financial projections in this section are based on the assumptions set out in the

following table.

70

Table 6.3: Financial assumptions

Area Assumptions

Income Clinical income

Clinical income in 2018/19 is assumed to increase by 4.7% in line with operational plans (we note that there are no material variances between the Trusts and local commissioners in respect of the income and activity triangulation for 2018/19). Subsequent increases are assumed to arise from activity growth (as described below) and under the following inflation rates:

● 2019/20: 0% in line with national planning guidance

● 2020/21 and 2021/22: 0.7% per year in line with national planning guidance

● 2022/23 onward: 1.0% assuming the national efficiency requirement will taper off in the medium term. We note that this is below the Bank of England’s target inflation rate of 2.0%, thereby not implying a real terms funding increase

Other operating income

Other income is assumed to remain at the 2018/19 plan level, increasing only in line with the inflation rates set out for clinical income above.

STF income

Counterfactual case:

● STF is assumed to continue being received for SUHFT throughout the projected period, on the basis that its financial performance does not deteriorate

● No STF is assumed for MEHT and BTUH, as the projections show no significant improvement in financial performance

Merger case:

● 2018/19: STF income is assumed to continue being received at £10.8m per year, in line with the 2018/19 operational plan. The basis for this is that financial performance across the Merged Trust is projected to improve

● 2019/20 onwards: STF income is assumed to be included at the 2018/19 allocation of £15.1m for BTUH, on the basis that the underlying performance will have improved to the point that it becomes eligible for STF funding as a standalone organisation (excluding the impact of non-recurring transaction and transformation costs). Similarly, £12.8m for MEHT is included from 2020/21, which is when its financial recovery plan is due to complete.

71

Area Assumptions

Expenditure: pay costs

Pay costs for 2018/19 is projected to increase by 1.5% in line with operational plans. Thereafter, pay costs are assumed to rise in line with activity increases (set out below) and at the following inflationary rates:

● 2019/20: 1.6% per year in line with national planning guidance

● 2020/21: 2.9% per year in line with national planning guidance

● 2021/22 onward: 2.9% per year

We note that NHSI has advised that the recent announcement on pay increases should be assumed to be fully funded. The costs and the associated income have not been included in the analysis, as there is no impact on the net deficit.

Expenditure: non-pay costs

Non-pay costs in 2018/19 are assumed to increase by 2.2% in line with operational plans. Thereafter, non-pay costs are assumed to rise in line with activity increases (set out below) and at the following inflationary rates:

● 2018/19: in line with operational plans

● 2019/20 onwards (in line with national planning guidance):

o Drug costs: 4.1% per year

o Procurement: 2.0%

o Premises (revenue costs): 3.1%

o Litigation: 1.4%

● Other costs: 2.0%

Activity Activity is projected to increase at 2.7% across all areas, in line with STP/PCBC assumptions. This assumption is consistent with CCG position where activity growth before QIPP is around 5-7%, and net activity growth after QIPP is close to 2.7%. The Trusts have shared the activity assumptions with CCGs to confirm that they align.

For services where such initiatives reduce activity beyond the underlying demand growth, it is assumed that stranded costs are avoided through planning and redeploying resources to deliver services in other areas.

CIPs Non-merger specific “business as usual” (BAU) CIPs are assumed at

● 2018/19: £47.9m recurrent in line with operational plans

● 2019/20 onward: 2.2% of total turnover, except for MEHT in 2019/20 only, where 4.9% is assumed because this is the second year of the trust’s recovery plan

72

Area Assumptions

Loans and interest

Interest costs for 2018/19 are assumed at the total interest costs in the operational plans of £17.7m. From 2019/20, additional interest costs are calculated at 1.5% of the cumulative annual deficit from 2019/20. This interest rate is in line with the rate the Trusts are currently charged for recent interim revenue support loans.

Transaction/ transformation costs

Counterfactual case:

● Transformation costs of £6.0m are assumed to be incurred for 6 months in the case that the Trusts continue to invest in the transaction and broader transformation schemes at risk for part of the year, until a decision is made not to proceed with the merger

Merger case:

Transformation costs of £12.0m are assumed in 2018/19 and £13.3m in 2019/20, decreasing to £10.5m in 2020/21, £6.5m in 2021/22 and £4.9m in 2022/23 as the integration programme is delivered. These are non-recurrent costs and are no longer included in the projections from 2023/24 as the integration programme is completed. Of these costs £2.5m relates to external support for the transaction (£2.0m of which falls in 2018/19) and the remainder relates to broader transformation initiatives and £3.0m will be funded from existing Trust resources each year in that five year period

Capital programme

The total cost of the capital programme is assumed to be £118.1m, which includes £45.6m for the elements that are required to implement those service reconfiguration that drive patient benefits specific to the merger. The I&E impact of this capital investment is described in the following assumptions.

Capital funding and PDC dividend

PDC funding of £118.1m is assumed to fund the capital programme. £45.6m of the capital programme is the element required to deliver the merger specific savings and is therefore included in the merger case only. The balance of £72.5m is included in both the counterfactual and merger cases.

The impact on the PDC dividend payment is calculated at 3.5% per year.

Depreciation and amortisation

Depreciation and amortisation are assumed to remain at the combined 2018/19 operational plan level of £35.1m, with the addition of 3% per annum on the capital programme.

6.3. Income and expenditure

The income and expenditure (I&E) for the counterfactual and Merged Trust cases

are shown in this section. The projections were calculated based on the assumptions

set out in the previous section.

73

Projected counterfactual financial performance 6.3.1.

This sets out the aggregated financial performance of the three Trusts in a scenario

where they do not merge. We note that:

● This assumes that the Trusts continue to deliver BAU CIPs

● This assumes that the Group structure would be reverted. The costs required to re-establish leadership teams at each Trust are assumed to be offset by the removal of costs relating to the current MSB Group.

Table 6.4: counterfactual I&E for the Trusts (the no-merger case)

The I&E for the counterfactual case shows:

● A small improvement in the aggregate deficit position, from £87.2m in 2018/19 to £73.7m in 2023/24. This is assumed to be largely driven by the increased CIP target for 2019/20 and income inflation of 1% in 2022/23 and 2023/24 (£7.5m). The position is also improved by the reduction in transformation costs from £6.0m in 2018/19 to nil in 2023/24

● A significant cumulative CIP requirement of £170.3m by 2023/24 to offset inflationary and activity pressures. This would have to be achieved by Trusts individually, without the support or infrastructure of the Group structure and without transformation support – this level of CIP would be very challenging to deliver in that context.

● The forecast net deficit position is forecast to increase in both 2020/21 and 2021/22 due to the impact of the investment in the capital programme on PDC and depreciation.

Projected financial performance for the Merged Trust 6.3.2.

The following figure sets out the projected financial performance for the Merged

Trust, incorporating merger benefits.

£m 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

FOT Plan Forecast Forecast Forecast Forecast Forecast

Clinical income 861.7 901.8 926.2 957.7 990.2 1,026.9 1,064.9

Other operating income 69.5 59.5 59.5 59.9 60.4 61.0 61.6

Total income 931.2 961.4 985.7 1,017.6 1,050.6 1,087.8 1,126.4

Pay costs (640.1) (646.5) (658.3) (681.4) (705.2) (729.9) (755.5)

Non-pay costs (338.9) (347.8) (352.6) (360.8) (369.4) (378.2) (387.4)

Transaction & transformation costs - (6.0) - - - - -

Total operating costs (979.0) (1,000.3) (1,010.9) (1,042.2) (1,074.6) (1,108.1) (1,142.9)

EBITDA (47.9) (38.9) (25.2) (24.6) (24.0) (20.3) (16.4)

Depreciation and amortisation (33.9) (35.1) (35.8) (36.6) (37.3) (37.3) (37.3)

Interest (18.3) (17.7) (18.6) (19.4) (20.3) (21.2) (21.9)

PDC (9.2) (6.3) (7.1) (7.9) (8.8) (8.8) (8.8)

Net surplus/(deficit) pre-STF (109.3) (98.0) (86.7) (88.5) (90.4) (87.6) (84.5)

STF 19.0 10.8 10.8 10.8 10.8 10.8 10.8

Net surplus/(deficit) counterfactual (90.3) (87.2) (75.9) (77.8) (79.7) (76.8) (73.7)

CIP (in year) 47.9 30.5 22.0 22.6 23.3 24.0

CIP (cumulative) 47.9 78.4 100.4 123.0 146.3 170.3

CIP % of turnover 5.0% 3.1% 2.2% 2.2% 2.1% 2.1%

74

Table 6.5 I&E for the Merged Trust

The I&E for the Merged Trust shows:

● An improvement of £59.9m from the counterfactual deficit of £73.7m to a deficit of £13.8m by 2023/24, driven by:

o Acute reconfiguration savings: £19.9m

o Corporate support savings: £8.1m

o Clinical support savings: £3.9m

o Additional PDC dividend payable as a result of the capital programme: £(1.6)m

o Additional depreciation charges relating to the merger-dependent element of the capital programme £(1.4)m

o Lower interest charges: £3.0m

o Additional STF funding resulting from the improved underlying financial performance: £27.9m

● The CIP assumption remains the same as for the counterfactual

Financial bridge 6.3.3.

The following chart illustrates the principal movements between: the 2017/18

forecast outturn position; the “do nothing” 2023/24 aggregate position; the 2023/24

counterfactual case position; the Merged Trust 2023/24 position before STF funding

and the Merged Trust position at 2023/24 after STF.

£m 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

FOT Plan Forecast Forecast Forecast Forecast Forecast

Clinical income 861.7 901.8 926.9 960.2 994.5 1,032.9 1,072.1

Other operating income 69.5 59.5 59.5 59.9 60.4 61.0 61.6

Total income 931.2 961.4 986.5 1,020.2 1,054.8 1,093.9 1,133.6

Pay costs (640.1) (646.5) (649.4) (668.4) (688.9) (710.9) (738.8)

Non-pay costs (338.9) (347.8) (350.3) (356.5) (363.1) (370.6) (379.3)

Transaction & transformation costs - (12.0) (13.3) (10.5) (6.6) (4.9) -

Total operating costs (979.0) (1,006.3) (1,013.1) (1,035.4) (1,058.5) (1,086.4) (1,118.2)

EBITDA (47.9) (44.9) (26.6) (15.3) (3.7) 7.4 15.5

Depreciation and amortisation (33.9) (35.1) (36.3) (37.5) (38.7) (38.7) (38.7)

Interest (18.3) (17.7) (18.4) (18.7) (18.9) (19.0) (18.9)

PDC (9.2) (6.3) (7.6) (9.0) (10.4) (10.4) (10.4)

Net surplus/(deficit) pre-STF (109.3) (104.0) (88.9) (80.4) (71.7) (60.6) (52.5)

STF 19.0 10.8 25.9 38.7 38.7 38.7 38.7

Net surplus/(deficit) Merged Trust (90.3) (93.2) (63.0) (41.8) (33.1) (21.9) (13.8)

CIP (in year) 47.9 30.5 22.0 22.6 23.3 24.0

Synergies (in year) - 9.0 7.9 7.0 5.8 2.3

Total 47.9 39.5 29.9 29.6 29.1 26.3

Total (cumulative) 47.9 87.4 117.3 146.8 175.9 202.2

Total CIP and synergy (% turnover) 5.0% 4.0% 2.9% 2.8% 2.7% 2.3%

75

Figure 6.1: Financial bridge from 2017/18 to 2023/24

We note that the assumptions will be reviewed and refined during the development

of the LTFM required for the Business Case.

6.4. Analysis of merger benefits

This section describes the post-merger benefits that are modelled and are likely to

fall into two areas: (i) greater efficiency in service delivery; and (ii) other

improvements in service delivery (such as improvements in patient experience or

clinical quality).

Corporate savings overhead 6.4.1.

The speed with which corporate overheads and clinical support services will be

realised is dependent on the transformational work-stream currently being

undertaken by Executive Directors with the assistance of external advisors. Business

cases have been approved in principle during March 2018 in respect of: HR,

procurement and finance. Further business cases for Estates & Facilities

management and Support Services are currently being presented. The estimated

corporate savings is outlined in the following table.

£90.3m £87.2m

£206.9m

£84.5m

£52.5m

£13.8m

£47.9m

£122.4m

£8.1m £3.9m

£19.9m £1.7m £10.8m

£27.9m

£8.2m

£36.7m

£119.6m

£1.6m

-

£50m

£100m

£150m

£200m

£250m

Fo

recast

MS

B G

rou

pd

eficit 2

01

7/1

8

Non

-recurr

en

t S

TF

and

imp

airm

en

ts

Actiiv

ty a

nd

co

st

pre

ssu

res

within

20

18/1

9 p

lan

CIP

pla

n fo

r 2

01

8/1

9

Fo

recast

MS

B G

rou

pd

eficit 2

01

8/1

9

"Do n

oth

ing"

deficit

incre

ase t

o 2

02

2/2

3

"Do n

oth

ing"

co

mbin

ed

deficit 2

02

3/2

4

Bu

sin

ess a

s u

su

al C

IPs

Co

unte

rfactu

al

agg

reg

ate

de

ficit 2

023

/24

(pre

-ST

F)

Corp

ora

te s

upp

ort

savin

gs

Clin

ica

l su

ppo

rt s

avin

gs

Acute

reco

nfigu

ratio

n

Ad

ditio

na

l P

DC

div

iden

dfr

om

ca

pita

l p

rog

ram

me

Inte

rest

and

dep

recia

tio

n

Me

rge

d T

rust

de

ficit

202

3/2

4 (

pre

-ST

F)

ST

F fu

nd

ing

in

clu

de

d in

the

cou

nte

rfa

ctu

al

ST

F fu

nd

ing

re

sultin

g f

rom

the m

erg

er

Me

rge

d T

rust

deficit 2

02

3/2

4

Merger synergies:£31.9m

76

Table 6.6: Corporate Savings

£m Savings estimate Assumptions

Board savings 0.2 Cost saving from the reduction in non-executive directors for the Merged Trust. There is limited opportunity to make further savings in this area, as the Trusts have already moved to a single executive Board under the Group structure

Procurement 1.5 Consistency of processes across the Trusts and establishment of one system. Estates opportunities are stated separately below.

Human Resources

1.4 Includes bank and agency rationalisation of temporary staffing arrangements across the Group; Occupational Health services and Transactional services.

Finance and contracting

1.1 Rationalisation of services, consistency of approach to in house & outsourcing, do once functions where possible.

Support Hub 0.7 Phase 1 includes IT help desk, Estates help desk etc.

Estates management

2.4 Management structure rationalisation and procurement opportunities.

Informatics 0.8 Savings from a review of management, leadership hardware and software.

Total 8.1

Further savings are being reviewed as a result of bringing three separate statutory

bodies into one, for instance one audit fee rather than three. These savings are yet

to be quantified.

Clinical service delivery savings 6.4.2.

Efficiencies and cost savings are planned to be delivered from a number of clinical

service transformations highlighted in the PCBC consultation document. Five

principles have been established against which efficiencies and potential savings

can be delivered:

1. The majority of hospital care will be delivered locally on the three main hospital sites with an A&E at each site;

2. Some low volume specialist services will be concentrated at one site;

3. Access to specialised emergency will be via the local A&E with transfer to a specialised site if clinically appropriate;

77

4. Planned operations requiring a length of stay will be kept separate from emergency care; and

5. Some hospital services should be provided closer to home or in the community.

We are currently reviewing efficiencies in ways of working that could release the

following funding by specialised service. The timescale for achieving changes to

clinical service delivery and releasing associated savings is two or three years and in

some cases may be longer.

78

Table 6.7: clinical service delivery savings


Reduced LOS 4.4 Improved utilisation of bed base capacity and rationalisation of clinical services across sites to reduce LOS in line with national benchmarking e.g. urology, ophthalmology, etc.

Pre procedure non elective

0.4 Rationalisation of service delivery.

Increased day case rates

0.2 Transformation of elective care programmes to increase rates where appropriate to improve patient experience & outcomes.

Agency – medical

1.3 Sustainable workforce initiatives to enable sub specialism, research opportunities, increased resilience in local workforce.

Agency - Nursing

1.0 Sustainable workforce initiatives including AHP roll out, improved resilience & opportunities across the geographic patch.

Agency – ST&T 0.4 Sustainable workforce initiatives including specialisation.

Activity – London NHS

4.7 Ability to offer patients care closer to home (net contribution).

Activity – non London NHS

0.5 Ability to offer patients care closer to home (net contribution).

Activity – private

2.0 Opportunity to expand specialisms offered as private patients across sites (net contribution).

Further model hospital opportunities

5.0 Further opportunities for savings linked to the model hospital. These are likely to include savings from reconfiguring staffing rotas across the three Trusts.

Total 19.9

Clinical support service savings 6.4.3.

In addition to clinical changes across the Trusts there are opportunities over the

period and beyond to rationalise and deliver once a number of functions. The current

modelling assumes savings will be found in the following clinical support services.

79

Table 6.8: clinical support delivery savings


Patient Interface including radiology centralised booking

1.3 Improve patient experience and productivity through:

● A standardised innovated, centralised and extended hours 7 days single point of contact & booking centre

● Call and agree appointment with patients

● Align outpatient & diagnostic appointment

Pathology Joint Venture

0.8 Improve quality while reducing cost by consolidating pathology laboratory to create a hub.

Radiology 1.3 Create an efficient and cost effective adequately resourced, extended hours and standardised working and joint procurement diagnostic imaging service that promotes cross site working, demand sharing and ensures future alignment of capacity with demand.

Pharmacy 0.5 Create a standardised consolidated pharmacy service (home care, aseptic production, medicine information, pharmacy procurement and inventory).

Adequate staffing on the ward through the creation of a wholly subsidiary outpatient dispensing.

Total 3.9

Opportunity and risk 6.4.4.

Detailed work on sensitivities and scenarios, including the development of a

downside model, will be carried out in the next phase of work as part of developing

the Business Case for the merger.

At this stage, the Trusts have identified there could be additional upside from future

service reconfigurations following the merger, however these would be subject to

further rigorous consultation requirements and so are not shown here. The Model

Hospital data for the three Trusts also identifies areas for operational improvement

but given the extent of the existing proposals for CIP and merger savings it will be

necessary to have the more granular level of detail on individual programmes to

ensure any additional savings are not a ‘double count’ of benefits. The financial

position could also be improved if the QIPP proposals of CCG were more effective

80

than assumed here. This is because growth in activity is typically driven by non-

elective activity (which typically are ‘loss-making’ services) and reduces elective

activity (where Trusts nationally make a surplus).

The main risk to the financial plan is the ability to deliver significant cost savings over

multiple years whilst managing the integration of three sites and business as usual

operational pressures. For example if the proposed savings were 10% less (across

CIP and merger) in FY19 and FY20 there would be an £8.7m negative impact on the

recurrent position. Delivering the level of savings set out is contingent on investment

in transformation over the period as described below, however this should quickly

start to pay for itself insofar as the current forecasts show that the net impact of

additional benefits and transformation costs results in a recurrent deficit (pre-STF

adjustments) that is £8.1m lower in the Merged Trust than in the counterfactual

scenario.

6.5. Transaction and transformation costs

Transformation costs are set out below showing the different areas of investment to

deliver the significant recurrent CIP or merger synergies set out above. Transaction

costs are a subset of these costs. Of the £47.4m of transaction costs below, it is

estimated that £9.7m will be external advisory costs (including £2.5m specifically

relating to delivering the merger transaction, £2.0m of which falls in 2018/19).

Table 6.9: Transaction and transformation costs (all non-recurrent)

These costs will be funded from a combination of existing budgets (in 2018/19),

merger savings and STF funding.


This sections considers the financial impact of the merger against a counterfactual

position. Overall the merger will lead to a significant improvement in the Trusts’

financial position, which by 2023/24 is forecast to get back to a deficit position that

£000 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

Plan Forecast Forecast Forecast Forecast Forecast Total

Change management cross group 3,000 - - - - - 3,000

Transaction cost 2,000 500 - - - - 2,500

Total transaction cost 5,000 500 - - - - 5,500

Change management cross group - 3,000 3,000 3,000 3,000 - 12,000

Strengthen performance management 130 130 130 130 130 - 650

Strategy unit development 1,500 1,800 1,800 1,500 900 - 7,500

Clinical and operational leadership 1,700 1,710 1,710 1,425 855 - 7,400

Digital transformation 1,200 1,200 - - - - 2,400

Workforce redesign and OD interventions 1,000 3,500 2,900 - - - 7,400

Corporate redesign 1,000 500 500 - - - 2,000

Strategic capital unit 500 1,000 500 500 - - 2,500

Total transformation costs 12,030 13,340 10,540 6,555 4,885 - 47,350

Funded from existing Trust resources (3,000) (3,000) (3,000) (3,000) (3,000) - (15,000)

Net impact on operating plan 9,030 10,340 7,540 3,555 1,885 - 32,350

81

aligns with the structural deficit on the MEHT site associated with the relatively high

financing costs of the PFI scheme.

Delivery of this transformation, including the significant level of recurrent CIPs

however is dependent on investment in the broader transformation alongside the

merger transaction itself and the costs of this have investment have been included in

this financial assessment.

82

7. Organisational design

7.1. Legal route to creating the Merged Trust

There are two main legal routes to creating the Merged Trust, although it should be

noted that these are primarily technical definitions within the NHS regulatory

framework and that in substance either route for the transaction would be in

substance a merger:

● A merger – this would involve dissolving all three Trusts and simultaneously creating one new Foundation Trust

● A merger by acquisition – whereby one of the Foundation Trusts (SUHFT or BTUH) legally acquire the other Foundation Trust (BTUH or SUHFT) and the NHS Trust (MEHT). NB – only Foundation Trusts are able to acquire other organisations. Currently there are no executive vacancies at either BTUH or SUHFT. There is one NED vacancy at Basildon which will not be recruited to given the transition year.

Work is ongoing to appraise which is the most appropriate avenue for creation of the

Merged Trust. There will be engagement workshops on this matter with non-

executive directors and governors.

7.2. Outline future board arrangements and emerging structure

The merged Trust will require a structure that provides the environment for a

collaborative approach and a new drive, but which is just as representative and

engaged with local communities as its predecessors.

As such the Merged Trust will be governed at its highest level by a Board of

Directors and a Council of Governors.

Establishing a new Board and Governance arrangements

The Board of Directors will be established as a unitary board whereby the non-

executive directors and the executive directors will make decisions as a single group

and share the same responsibility and liability. During the transition period and once

the Merged Trust is established, a board development programme will be developed

which ensures that board members have a common understanding of their role and


The legal requirements and process for creating a new organisation

The proposed governance structure for a merged Trust

An outline operating structure for a merged Trust

A high level organisation development plan

A high level workforce plan

83

responsibilities as part of a unitary board. A skills analysis will take place to inform

personal and collective development planning.

Corporate and clinical governance is a dedicated work-stream within the programme

plan. The composition of the Board of Directors for the Merged Trust will be a key

strand of the preparatory work undertaken during 2018/19, in full consultation with

the Boards of Directors of the three current Trusts and in the case of the Foundation

Trusts, their Councils of Governors.

The Board of Directors will operate within a framework of local accountability through

members and the Council of Governors in line with legislation. Governors will be

responsible for holding the non-executive directors, individually and collectively, to

account for the performance of the unitary Board of Directors. In turn, the Governors

will be accountable to the members who elect or appoint them and must represent

their interests and those of the public served by the Merged Trust.

A working group will be set up to develop the draft Constitution for the Merged Trust.

The group will meet on two or three occasions over a two-month period, producing a

draft Constitution by the end of June 2018. This will directly address the composition

of the Board of Directors (executive and non-executive members) and the Council of

Governors, as well as the appointment process for Board members and the terms of

office for non-executive directors and Governors.

The aim is to have a fully operational Council of Governors and Board of Directors

on 1st April 2019. Interim arrangements would be in place for the last quarter of the

current trusts’ operation to facilitate a smooth transition and provide clear leadership

and accountability to the Merged Trust from the first day of operation.

To ensure all Governors and Board members take up their positions on 1st April

2019, there will be elections for the Council of Governors for the Merged Trust during

autumn 2018, leading to the selection process for the non-executive directors in the

first three months of 2019. The selection process for executive directors would also

take place during this time. The committee and governance structure will also be

developed during 2018/19.

Proposed Governance Structure

A proposed “top-level” corporate and clinical governance structure comprises the

following elements and key design principles:

● Board of Directors (monthly meetings)

● Finance, Resources and Performance Committee (monthly meetings)

● Strategy and Partnerships Committee (bi-monthly meetings)

● Workforce and Organisational Development Committee (bi-monthly meetings)

● Quality Governance Committee (monthly meetings)

● Audit Committee (quarterly meetings)

84

● Charitable Funds Committee (quarterly meetings)

● Remuneration and Nominations Committee (six monthly meetings)

● Council of Governors (quarterly meetings)

Figure 7.1: Proposed governance structure for the Merged Trust

Details of the governance and leadership structures below Board and committee

level will be worked through during the development of the PTIP (see also

section 8.5). The governance and committee structure to deliver corporate and

clinical governance at all levels of the organisation will be designed in full

consultation with the Trust Boards and based on best practice, alongside learning

from other trusts who have merged in recent years and those who are in the

planning stages for a forthcoming transaction.

Site and operational arrangements in the Merged Trust

A key consideration when designing the committee and reporting structure will be

ensuring there is sufficient management grip and control and assurance at Board

and committee level about the performance of each site and of the cross-site clinical

services. The future structure also has to minimise the issue of duplication that is a

key driver of the merger.

The management structure of the Merged Trust will be developed during 2018/19 in

discussion with the existing trusts and regulators. There is currently an assumption

that the three site leadership teams in place since February 2017 will remain the

model moving into the Merged Trust. There is also consensus that the Merged Trust

will operate a matrix model of some form, where there is a Managing Director on

each site complemented by clinical divisions with responsibilities for particular

services across sites.

Council of governors

(Quarterly)

Board of Directors

(Monthly)

Strategy and Partnerships Committee

(Bi-monthly)

Audit Committee

(Quarterly)

Workforce and OD

Committee

(Bi-monthly)

Quality Governance Committee

(Monthly)

Finance, Resource & Performance Committee

(Monthly)

Remuneration & Nomination

Committee

(6 monthly)

Charitable Funds

Committee

(Quarterly)

85

Whilst it is intended that key elements of the current governance and management

structure across the sites will be retained in the Merged Trust in order to maintain

grip and control, there will be significant merger-specific benefits from creating a new

statutory body with a unitary board and unitary governance structure rather than

continuing with the current collaborative governance arrangements. Since the

existing framework was introduced in January 2017, concerns have been expressed

by all stakeholders including governors, executive directors, non-executive directors

and site leadership teams about two particular aspects of working in this way. The

Oversight Committee, which essentially functions as an “audit committees in

common” conducted a self-effectiveness exercise in Summer/Autumn 2017 that

confirmed the informal concerns that had been expressed from the outset. The key

issues are outlined below.

Firstly, despite efforts to minimise duplication, there has been overlap in discussions

on a variety of matters between the different “layers” of the structure, as different

groups seek assurance. For example, performance against the 4-hour A&E wait and

other access standards is discussed at site-based committees and again at the Joint

Working Board as part of a group-wide analysis of operational performance. The

duplication has partly been driven by the fact that not all of the non-executive

directors have a role in the group infrastructure and discussions need to be repeated

to ensure all parties are sufficiently assured on key aspects of performance,

balancing their fiduciary duty towards their own trust with the need to take a group-

wide perspective. A single organisation would remove this dichotomy as all executive

and non-executives would be members of a unitary board for a single organisation.

Secondly, each organisation operates under its own standing orders, standing

financial instructions and schemes of delegation. Many decisions which are

strategically important or of high financial value cannot be delegated to the Joint

Working Board and lead officers have found it necessary to take the same decision

through three separate governance processes. A merger-specific benefit would be

the establishment of a single board and governance structure with a single corporate

governance manual, significantly increasing the efficiency and speed of the decision-

making process.

During 2018/19 as part of the transition to the governance structure of the Merged

Trust, the Strategy and Partnerships Committee will be established. This element is

not currently within either the separate governance structure of the trusts or the

collaborative governance framework. With effect from April 2018, this Committee will

bring together non-executive and executive members of the three Trust Boards to

develop strategies which take a cross-trust perspective in relation to clinical service

provision, finance, quality and safety, information and workforce. Task and finish

groups will develop particular strategies, with involvement from board

representatives of all three Trusts, such that all current board members will have an

opportunity to input to and have a stake in the strategies of the Merged Trust and the

strategic direction of the separate Trusts in this transition year.

86

7.3. Outline operating structure of the proposed Merged Trust

Naming the Merged Trust

The naming process for the Merged Trust should reflect the collaborative approach

through which the rest of the merger is being planned. The new name will comply

with NHS Branding Guidelines as published by the Department of Health. Our

communications professionals will draw up a range of suitable options for

consideration by the trust boards, governors and staff, which will take place once

clearance for the transaction has been received.

Future operating model

Initial work has been undertaken to define the options for the future operating model,

with a focus upon the most effective model to deliver the benefits of the

transformation in clinical services, clinical support services and corporate support

services. At this stage it has been agreed that it is necessary to commence the

process of standardising current operational and clinical leadership structures across

the three sites until such time in order to best facilitate cross site working and to ease

any further transition which would be required post-merger. The near term

organisational structure is shown below, which was discussed and endorsed in

principle by the Joint Working Board in December 2017.

Figure 7.2: Proposed near term organisational structure

Over the summer of 2018 further options will be developed for the future operating

model as work to progress service reform continues and, most importantly, the

decisions which are made by the CCG Joint Committee on service reconfiguration

are known. At all times the principle of ‘form follows function’ will be observed.

Executive

Operating Unit 1

Mid Essex

Operating Unit 2

SouthendOperating Unit 3

Basildon

Operating Unit 4

Group Clinical Support

Corporate Support Shared Services

Emergency Access

and Ambulatory Care

Emergency Access

and Ambulatory Care

Emergency Access

and Ambulatory Care

Non-specialist

medicineNon-specialist

medicine

Non-specialist

medicine

Non-specialist surgery Non-specialist surgery Non-specialist surgery

Specialist services Specialist services Specialist services

Work focused on standardised

operating practices and local

implementation

Work focused on standardised

operating practices and local

implementation

Work focused on consolidating

management arrangements and

integrating practice.


management activities and

practice.


management activities and

practice.

Women and Childrens’ Women and Childrens’ Women and Childrens’Work focused on consolidating

management arrangements and

integrating practice.

87

7.4. Outline organisational development plan

Our OD plan is driven by the draft People Strategy and we have started to embark

on a number of initiatives to support the local hospital sites and with greater

concentration on group activities around the following areas:

● Recruitment & Retention

This is an area of significant priority to the organisation and we have developed a

range of recruitment & retention plans, In particular, to address our supply and

vacancy issues around the Nursing workforce. We believe the creation of the

Merged Trust will improve our attraction to potential candidates. We recognise

that we are competing with areas like London and will seek to develop a

compelling offer. We know from staff that we need to improve our professional

development and opportunities for career progression. The creation of a new

organisation will lend itself to addressing some of these issues and being a better

place to create common offers.

Along with an improved education and learning offer we will consider in targeted

specialities & professional groups what other benefits we can offer including

financial benefits for e.g. Recruitment and retention premia.

● Staff Engagement

Our staff engagement scores from the National Staff Survey in 2017 range from

3.71 and 3.77 across the three Trusts against an acute average of 3.79. This is a

reduction from the previous year’s figures and indicates that we do need to work

on improving staff engagement across the group. We will do this by improving

communication, promoting inclusiveness and equality and improving staff

experience, reward and recognition. The forthcoming culture audit and findings

will also further inform our approach to improving staff engagement across the

group and indicate where specific actions need to be taken. The Joint Executive

team acknowledge this as an area where there should be renewed focus and

improvement.

● Communication

We will develop an informed workforce through:

encouraging a two-way communication process with active staff

engagement at all levels with real time feedback

Offer a range of engagement routes and feedback routes (face to face,

where staff can feedback, ask questions and share ideas with peers and

with management

Use of apps, graffiti walls, and other multimedia channels as engagement

tool

88

● Being inclusive in our approach

We will foster an inclusive environment through:

Inviting staff to be part of redesign of services through informal networks,

committees, and interest groups. This will ensure staff feel involved in key

decisions regarding our transformation process. A fundamental of our new

organisation will be about continuous improvement and ensuring staff are

equipped with the skills and know how to make changes to their work.

Ensuring staff views are representative of the diversity of our workforce

and that all views are heard and listened to. We will do this by monitoring

participation and devising proactive ways of reaching out to groups where

engagement is low.

Ensuring that we fulfil every aspect of the Equality Delivery Standards and

ensure in particular that actions coming out of our Workforce Race

Equality Scheme (WRES) analysis are followed up and implemented.

● Improving Staff Experience, Reward and Recognition

A key tool of engagement is for staff to feel appreciated and valued. While we

already have various staff reward and recognition initiatives across the three

hospitals, we will seek to integrate these across the Merged Trust. This will

increase visibility and participation and provide means for staff to get the

recognition they deserve for the work they do.

Some of our immediate actions are as follows:

Develop and implement an engagement plan that is easy to communicate

Facilitate Executive Engagement Events (frontline forum) ; facilitated

sessions aimed at delivering strategic narrative , gathering feedback and

accountable actions - ‘Your Voice, Our Action’

Revision of staff on-boarding unifying corporate induction across the three

Trusts

Recognising and celebrating the success of our staff

Developing our strategic narrative ‘our change story’ – which will be

supported by the development of a new brand, how we create connectivity

and affiliation for staff with the new organisation but also retaining the

importance of the local hospital sites.

● Nurturing a new identity

Before starting to describe what this will look like we intend to undertake a culture

audit utilising the NHSI toolkit that will provide the diagnostics of current state

before embarking on further work with staff about the values, behaviours and

89

expectations of the Merged Trust. This will be an evolving process for staff who

work on all of the hospital sites to be able to connect with the Merged Trust and

its agreed values and behaviours, and commitment to continuous improvement.

We would like to have a workforce that feel able to make changes and have the

appropriate improvement skills and feel empowered to make changes to their

work and improvements for patients.

● Leadership Development

Across the hospitals a range of leadership development takes place through

internal and well recognised external programmes. We have initiated the first

MSB development programme for managers, which has been helpful in creating

networks across the group and will continue to build on this programme. As part

of our development of senior leaders we will be implementing a new talent

management framework and development centre, which is intended to be

developmental and better understand the requirements for leaders as we

continue through a programme of rapid change. As part of this process we will be

commissioning for 120 senior leaders to attend an external programme that

supports our strategic direction but also supports managers to consider their

leadership preference.

As part of developing and engaging with senior leaders we have started to

develop our change story and led by the CEO and other Executive directors we

will start to describe the story and the role that leaders will need to play in order

for the Merged Trust to be successful.

7.5. Outline workforce strategy

The transformation of clinical services has commenced and will be ongoing for the

next 3 to 5 years. Key to the delivery of sustainable models of care is a well-

equipped and adaptable workforce. However the workforce across the group is

characterised by:

1. Vacancy Factor

● There are over 1,800 vacancies across the three Trusts which include over 200 medical vacancies and 700 nursing vacancies. Demand for nurses was 19% higher between July and September 2017 than the same period two years ago (NHS Digital). Nationally, there are 34,260 nursing vacancies. Overall there were 87,964 vacant full-time posts being advertised across the NHS, with nursing accounting for 40% of these.

● Voluntary turnover is 15% with nurses at 14.6%. Using the rate at which nurses are leaving Trusts as an example, this has increased from 12.3% in 2012/13 to 15.0% in 2016/17. The rate of nursing staff leaving the NHS altogether has increased from 7.1% in 2011/12 to 8.7% in 2016/17

● Across our group we have 230 medical staff vacancies including doctors in training and 80 allied health professional vacancies.

90

2. Turnover

● Voluntary turnover of approximately 15%

● Registered Nursing voluntary turnover at 15.3%

● About 30% of our staff are over 50 and above.

3. Temporary staffing spend

● Agency use as a percentage of total pay spend is approximately 9%.

4. Absence

● Sickness absence level of 4.4 % with a 12 month average at 3.9%. Current national position as at December 2017 was 4.23%.

We know over the next three to five years we will require a significant improvement

to fulfil our aspirations and deliver our clinical service strategy. Therefore, the

following will need to be undertaken:

● An appropriate supply and significantly improved retention of our workforce to deliver the clinical services

● Workforce highly trained and skilled to maintain the high level of performance required to sustain the clinical strategy

● Current workforce gaps across the group need to be addressed using new and improved strategies

● A culture of high performance, improvement, measurement and innovation

● A highly engaged workforce and a strong sense of inclusion and advocacy to their hospital and the Merged Trust

● The development of a new and well understood employment brand going forward

How we will deliver the workforce strategy

The plan is to develop a more centralised model for transactional recruitment

activities in 2018/19 that will enable a quicker and more efficient recruitment process.

Our aim will be to establish a local shared service centre that will handle all aspects

of the resourcing processes (including rostering, permanent recruitment (medical

and non-medical), temporary recruitment (medical and non-medical), establishment

control and processing starters, changes and leavers. It will handle high volumes of

transactional activity, quickly and efficiently. The implementation of this will be

challenging prior to the merger (as described in section 3.3.5) but even making early

progress in these areas will support the more substantive changes on service

reconfiguration after the transaction date.

2018/19 will then see the Trusts working more closely together to seek improved

ways of attracting staff that will support effective implementation of the merger. For

each of these areas the Trusts will be able to effectively plan using its existing

structure but will be dependent on the merger to implement substantive

improvements. These areas include:

91

● Developing joint branding and marketing that will then enable promotion of the group as the default NHS employment destination for Essex

● Developing a joint advertising template, with one universal template used for all roles – this will be aligned with the vision to operate as a single Trust

● Developing branded material (working with Communications Teams) that will be used by the group for all recruitment campaigns, job fairs, conferences and attraction related activities

● Identifying areas where we can start to offer rotations across all sites for particular staff groups and specialisms

● Whilst as a group we are collaborating well and progressing with joint initiatives, as a Merged Trust we will be able to provide a more consistent set of offers that we are currently unable to mobilise in the current arrangements.

International recruitment

● In addition to local plans, the MSB group will identify opportunities and put in place firm plans to undertake joint international recruitment campaigns for nursing, medical and allied health professional roles. A potential MSB group procurement exercise is already under consideration targeting nurses from India. Difficulties will continue in making the most appropriate decisions about allocation of these posts until the merger is complete due to the misaligned incentives as described in section 3.3.5. We will also continue horizon scan and explore other opportunities to ensure we have an on-going supply to reflect our current turnover.

Hard to fill roles

● Specific plans will be developed for each hard to fill role including ‘golden hellos’, and recruitment, and retention packages are in place for specific identified roles across each site. Programmes such as the ‘refer a friend’ scheme will continue to be explored.

Sickness Absence

● The three Occupational Health and wellbeing teams will be organised as an integrated hub and spoke model and additional health and wellbeing resources will be introduced to provide the support required ranging from counselling, to referrals. A HR advisory team will be introduced to free up HR resources to proactively manage sickness absence in their directorate.


As a group good progress has been made in developing plans and working far more

collaboratively. Once the Merged Trust is formed there will be greater alignment and

the ability to brand and market as one, an improved set of common offers and

reduction in the complexity of being three separate organisations. We will be able to

rotate staff more easily and provide experiences and opportunities for development

without the requirement to undertake additional transactional processes that

currently happen, whereby staff have to be seconded or hold honorary agreements.

We will be able to flex our workforce and as we embark on our proposed clinical

service changes, subject to commissioner approval, we will be able to create new

92

sustainable rotas and the ability for staff to perform duties across hospitals, where

there is a requirement.

This section describes the two main legal routes to bringing the Merged Trust into

being, namely a merger by merger or a merger by acquisition. Work is ongoing to

appraise which is the most appropriate avenue for creation of the Merged Trust, as

well as the committee and governance arrangements that would form the structure of

the Merged Trust.

Initial work has been undertaken to consider possible options for the future operating

model and over the summer of 2018, these options will be developed taking into

account the decisions made by the CCG Joint Committee on service reconfiguration

(once known).

A highly skilled and engaged workforce will be key to a sustainable and high

performing merged organisation, and a strategy for delivery of workforce

requirements is in its development phase. A number of actions have been planned in

2018/19 to deliver the workforce strategy.

93

8. Delivery and programme management

8.1. Programme overview

In order to deliver the strategic and business proposals for change, a dedicated

Programme Governance and Leadership structure has been established by the Joint

Working Board. This structure (set out in section 2.5) aims to make the best use of

internal talent to drive forward particular work-streams within the project as part of

the Programme Delivery Group. Executive and non-executive leadership is provided

by a Programme Board, reporting and providing assurance to the Joint Working

Board on behalf of the three Trust Boards.

The Project has being led through the Strategic Case phase by the Deputy Chief

Executive and Chief Transformation Officer, Tom Abell as Senior Responsible

Officer (SRO) and the Group Director of People Strategy and Organisational

Development (Danny Hariram). A Chief Commercial Officer will be joining the Trust

during May 2019 and will lead the programme as SRO in the next phase.

In recognition of the need to ensure both capacity and capability of the internal

programme team, the Joint Working Board commissioned independent advice and

support to the transaction from KPMG and Addleshaw Goddard, who have

experience supporting mergers in the NHS and in the commercial sector. The

Delivery Group also benefits from the support of a Programme Management (PMO)

professional.

In December 2017, the Joint Working Board approved a first tranche of funds for the

transaction, to minimise the risk of failure to proceed due to insufficient capacity and

capability. Risks associated with human and financial resources to deliver the

transaction are monitored and managed by the Programme Board by means of the

Programme Risk Register.


An overview of the programme, including workstream leadership

The timeline for development of a merger

The associated regulatory requirements, including the roles of the CMA and NHSI

The preliminary integration planning

A High level benefits realisation strategy for the merged Trust

A high level view of due diligence, governance, workstreams and indicative programme costs

An outline stakeholder engagement strategy and plan

94

8.2. Overall timeline

The figures below set out the key activities and milestones required for the merger to proceed on the planned date of 1 April 2019.

The high-level timeline below sets out development of content (blue), JWB and Trust Board approvals (green and purple), external

approvals (orange) and procurement of support (yellow). It also highlights some of the key interdependencies. This timeline will be

refined further as part of the Business Case phase and development of the PTIP. It is noted that this is a challenging timeline with

multiple interdependencies and areas that are inherently uncertain (such as the Consultation and CMA process). In consultation

with NHSI it may be necessary to extend this to either July 2019 or October 2019.

Strategic Case

Appointments of advisors to supprt as required across all workstreams below

Business Case

Draft Heads of Terms

Deal negotiation, contracts and completion under s.56A

Benefits Case / Competition Case for CMA Submission

NHSI review of draft patient benefits case

CMA pre-notification

Phase I review by CMA (upto 40 working days - so 2 months)

Develop draft transaction model

Work with integration teams on costing implementation and benefits

Refine working transaction model

LTFM

Integration planning and costings by workstream (Clinical, Support, Back office)

PTIP - drafting and approval

Agree legal form of transaction (merger or acquisition)

Agree appointments process for Governors and Board

Run appointments process for Governor, Chair and NEDs

Run appointments process for Executive BoardGovern

ance &

org

anis

ational

form

Apr-18 May-18

Tra

nsaction

Busin

ess C

ases

and D

eal

CM

A

subm

issio

n

Fin

ancia

l m

odel

Inte

gra

t

ion

Pla

nnin

Jan-19 Feb-19 Mar-19Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18Jun-18

Capital scheme final inputs

Capital scheme draft inputs

PTIP inputs

95

Consultation period

Analysis of findings and approval of DMBC

Capital SOC

- Estates strategy / Masterplanning

- Activity and capacity modelling

Capital OBC

- Overall and drafting business case

- Capital cost consultants and architect development of options + lifecycle

- NPV options appraisal and select preferred option (quantify benefits + costs + risks)

- Initial assessment of commercial options for procurement and market testing

- Risk register

- LTFM model + finalise decisions on commercial arrangements

- 1:200 drawings + regulatory compliance

- confirm preferred procurement route

- sensitivity analysis

Capital FBCs (FBC for priority schemes by June 2019)

Agreed scope of DD with NHSI and Trust Boards

Baseline due diligence / diagnostic

Follow-up DD (if required)

Working Capital review

Quality Governance preparation and review

Financial Reporting Procedures preparation and review

PTIP review

Report

ing

Accounta

nt

revie

w

PC

BC

/

DM

BC

Capital busin

ess c

ases

Due

dili

gence

Apr-18 May-18 Jun-18 Jul-18 Aug-18 Mar-19Feb-19Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

Input to CMA process

96

8.3. Regulatory requirements

As discussed in section 7.1, the proposed transaction will take the legal form of

either a merger of the three organisations to create a new NHS Foundation Trust, or

will involve the merger by acquisition of one Foundation Trust (Basildon or

Southend) and the NHS Trust (Mid Essex). In any event, the legislative and

regulatory requirements with which the Merged Trust will need to comply will be

those governing NHS Foundation Trusts.

The key regulatory requirements for the merger are:

● NHSI review and approval of Strategic Case, Business Case, PTIP and associated submissions. NHSI will also review CMA submissions and provide advice on the PBC

● CMA approval of the merger, based on the merger notice and PBC (detailed in section 5)

● Development of the Business Transfer Agreement, with associated heads of terms

● Reporting accountant review of quality governance (under the Well Led Framework), working capital, PTIP and Financial Reporting Procedures (FRP) for the Merged Trust; and

● A number of formal approvals as set out in NHSI’s transactions guidance

The timing of key regulatory activities for the merger are set out in section 8.2.

CMA and NHSI competition roles 8.3.1.

This section sets out the process for CMA approval, the extent of competition

between the Trusts, patient benefits that may meet CMA criteria and how the Trusts

will engage with the CMA during the CMA process.

The CMA is the UK body which has a statutory obligation to review mergers between

NHS Foundation Trusts, in order to identify whether any such merger may lead to a

decrease in competition and choice for patients or Commissioners. The proposed

merger between MEHT, SUHFT and BTUH would therefore be reviewed by the

CMA, and can only be completed once CMA approval has been obtained.

Review of a merger by the CMA involves a thorough review of how a merger will

impact the markets in which each of the three Trusts operate, the patients and

commissioners in those markets. In past cases, the CMA has defined the relevant

markets as individual specialties within (where relevant) elective and maternity

services, non-elective services, community services, private services, and

specialised services. Once the CMA has identified the relevant markets, it then

considers whether there is a loss of competition in each relevant market by reference

to competition in the market (i.e. to attract patient referrals), and/or competition for

the market (i.e. bidding for contracts for services). The CMA considers the level of

competition in markets impacted by the merger in a no merger scenario (i.e. the

counterfactual) against the level of competition in these markets that would be

97

expected once the merger is completed. A substantial lessening of competition

(SLC) may be identified if there are any markets where competition is noticeably

lessened in the merger scenario as compared to the counterfactual.

If the CMA finds there is a realistic prospect of an SLC, at Phase 1 it has a duty to

refer the merger to Phase 2 unless a discretionary exception applies. The relevant

exception in the case of NHS mergers is where any Relevant Customer Benefits – in

this case, benefits to the patients served by MEHT, SUHFT and BTUH, arising from

the merger – outweigh potential adverse effects on patients and/or commissioners of

any SLC.17 NHSI has a statutory role to provide advice to the CMA on whether

benefits to patients are likely to be achieved by the merger. In order to provide

evidence on patient benefits, the Trusts will need to submit a PBC to NHSI (and

subsequently the CMA) which sets out the benefits to patients from the merger. In

order for benefits to patients to be counted by the CMA as Relevant Customer

Benefits, they must meet three criteria. NHSI will provide advice to the CMA on

whether these criteria are met:

● the proposed benefits must be likely to represent improvements in quality, choice or innovation of services for patients or in value for money for commissioners

● the proposed benefits must be likely to be delivered within a reasonable period as a result of the merger; and

● the proposed benefits must be unlikely to accrue without the merger or a similar lessening of competition (i.e. the benefits are merger-specific)

For any merger between Trusts where a realistic prospect of an SLC is likely to be

identified (such as this one, as discussed further in section 5.2), a strong patient

benefits case is therefore needed if the merger is to be cleared by the CMA.

Overview of the CMA approval process 8.3.2.

Before providing formal advice to the CMA on the likely patient benefits arising from

the merger, NHSI will also help the Trusts to develop the patient benefits case. This

involves providing advice on which benefits are likely to meet the criteria, what

evidence is needed to demonstrate them, and comments on several iterations of the

draft case. NHSI will also provide advice on the likely CMA timeline, and crucially,

will inform the Trusts of when it is happy for initial discussions with the CMA to begin.

This is because NHSI needs to be confident that it has enough evidence on patient

benefits in order to provide its formal advice to the CMA, before the CMA Phase 1

review process begins.

Once the go ahead from NHSI is received, the Trusts will therefore initiate

engagement with the CMA (supported by the Trust’s advisors) and submit a draft

17

See CMA Guidance on the review of NHS mergers https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/339767/Healthcare_Long_Guidance.pdf

98

Merger Notice to the CMA. This will then commence a period of ‘pre-notification’,

typically around 4-6 weeks but which can take longer depending on the level of detail

requested, during which the CMA gathers the further information from the Trusts and

NHSI, which it needs to start its formal Phase 1 review. Once the CMA is satisfied

with the information that has been collected, the formal merger process begins. This

process has two phases, specifically:

Phase 1:

● Timeframe for the CMA’s review: maximum 40 working days*. Parties to a merger may in some circumstances request to be fast-tracked to Phase 2, which would shorten the Phase 1 process to some extent.

● The CMA’s legal standard: The CMA will seek to assess whether there is a realistic prospect that the merger would give rise to an SLC.

● Counterfactual: At Phase 1, the CMA typically considers the relevant counterfactual to be the continuation of pre-merger conditions of competition, rather than undertaking a more in-depth consideration of how the competitive landscape may look if no merger were to occur.

● Potential outcomes: If the CMA finds a realistic prospect of an SLC it will refer the merger to Phase 2, unless

● Exception to the duty to refer: If the merger leads to patient benefits – which meet the CMA’s criteria above– it may at its discretion not refer the merger to Phase 2 (and instead clear the merger at the end of Phase 1) if the patient benefits are thought to be of sufficient magnitude and range to outweigh the potential effects of any SLC.

*unless the CMA ‘stops the clock’ by pausing proceedings, typically because Trusts are not able to provide the information

needed. This is, however, rare.

99

As well as the longer timeframe involved with a Phase 2 review, set out above, it is

also a substantial and costly undertaking for each of the Trusts as well as the CMA.

In a Phase 2 review, further analysis will be needed at the specialty level in order to

refine the competition analysis of relevant specialty areas. In particular, such further

analysis may suggest that there are fewer areas of competition concern, however, it

is important to realise the increased evidence and analysis that will need to be

provided. In a Phase 2 review, the CMA will ask for substantially more information

and evidence from the Trusts, and the Trusts will likely need to engage much more

extensively with the CMA’s analysis (and potentially further engagement with NHSI

and the PBC may be needed as well). Phase 2 will therefore involve additional cost

and resource from the Trusts, and their legal and economic advisors, beyond just the

extra time involved to achieve clearance.

The following paragraph sets out the Trusts' current view of the extent of competition

between them. This is based on the initial advice received from NHSI in this regard,

as well as the analysis conducted by the Trusts’ legal and economic advisors so far.

The subsequent section provides a brief overview of patient benefits which are likely

to meet the CMA’s criteria (covered in more detail in section 8.3.4). Section 8.3.5

then sets out the Trusts’ proposed approach for engagement with the CMA, as a

result of the current view of competition between the Trusts and the likely patient

benefits.

Phase 2:

● Timeframe for the CMA’s review: maximum 24 weeks*.

● The CMA’s legal standard: The CMA will seek to assess whether the merger would be expected to result, on a balance of probabilities, in an SLC. This is, therefore, a more lenient threshold than applied at Phase 1.

● Counterfactual: At Phase 2, the CMA has more scope to consider the most likely scenario for conditions of competition in the absence of the merger. There is, therefore, more scope to put forward evidence that competition would be lower in future if the merger did not go ahead, which might suggest that the merger is less likely to give rise to an SLC.

● Patient benefits: As with Phase 1, the CMA will assess whether there are relevant patient benefits – which meet its criteria – which offset any SLCs which it thinks are on balance expected to arise.

● Potential outcomes: After weighing the evidence on competition and on patient benefits, the CMA will either clear the merger** or block the merger.

*unless the CMA ‘stops the clock’ by pausing proceedings, typically because Trusts are not able to provide the information

needed. This is, however, rare.

**the CMA may clear a merger subject to ‘commitments’, also called remedies, which might involve divesting assets or

offering behavioural commitments in order to allay concerns about an SLC. However, such commitments are unlikely to be

relevant in the NHS context.

100

Competition between the Trusts 8.3.3.

This section provides a summary of the current evidence on the extent of

competition between the Trusts, and how this may be assessed by the CMA. This

does not, however, represent the detailed, finalised view of the areas in which the

CMA may find an SLC. For this, further analysis will be needed – including more

detailed quantitative scrutiny of the referral analysis, as well as more detailed

qualitative analysis of the Trusts’ operations within individual specialties.

The CMA considers that Trusts compete for a range of services offered. For elective

and maternity services, Trusts compete ‘in the market’ – i.e. Trusts compete to

attract individual patients, and hence income, for particular services. For specialised

and non-elective services (with the exception of maternity services) NHS trusts

compete ‘for the market’ – i.e. the Trusts compete to win tenders and commissioning

of services from CCGs and national commissioning bodies.

The CMA considers that a merger between Trusts that closely compete in markets

for elective and maternity services may decrease the choice that patients have, and

the removal of a close competitor through the merger will reduce the merged Trust’s

effort to improve quality of services offered in order to attract patients from

competitors. Similarly, the CMA considers that a merger between Trusts that closely

compete for the market in non-elective and specialised services may decrease the

choice the Commissioners have for where to commission certain services, and

consequently, the removal of a close competitor through the merger will lead the

merged Trust to offer worse value for money or range of services that can be

commissioned.

As concerns competition for the market (i.e. specialised and non-elective services),

the CMA is likely to consider information on tenders to commission services where

more than one of the merging parties may have bid for a service. If there are a

number of areas where this occurs, or there is a pattern of bidding for the same

commissioned services, and there are few other bidders for these services, the CMA

may consider an SLC in competition for the market for non-elective or specialised

services. This has usually been less of a focus in previous CMA cases, and instead

concerns have focussed largely on competition in elective and maternity services –

the others are not therefore assessed further at this stage.

When considering competition in the market (i.e. elective and maternity services),

the CMA considers referral patterns from GP practices that refer to the merging

Trusts. One of the merging Trusts is selected as the ‘anchor Trust’, and the share of

referrals for elective activity that would go to other Trusts in the hypothetical scenario

that the anchor Trust is not available is calculated. This share is based on the

101

proportion of elective referrals within a specialty to other Trusts, by GP practice.18

This analysis is conducted separately for outpatients, day-cases and elective

inpatients; the analysis is repeated using each of the merging Trusts set as the

anchor Trust. Competition issues are considered likely in a particular specialty if the

results indicate that the reallocated share of patients from an anchor Trust to the

other merging parties is at 40% or greater. Where this is the case, this suggests that

the merging Trusts may be close competitors for patients, as GP practices who refer

patients to the anchor Trust, also often refer patients to the other merging Trusts;

the merger would thus decrease the options of Trusts where those patients can

receive care.

In December 2017, NHSI provided the Trusts with updated outcomes of the referral

analysis they had conducted. This analysis indicated that in a potential three-way

merger between the Trusts, there are 26 elective service areas (11 admitted and

15 outpatient) which have referral reallocation ratios of 40% or greater, and hence

are likely to be considered candidates for SLCs by the CMA. These 26 service areas

fall in 16 specialties, specifically:

● ENT (Oral surgery, Mouth, Head, Neck and Ears Procedures and disorders)

● Digestive (Gastroenterology, digestive system procedures and disorders)

● Obstetrics (Maternity)

● General Medicine

● Rehabilitation

● Cardiology (Cardiac Procedures)

● Endocrinology

● Dermatology (Skin surgery and Skin disorders)

● Gynaecology (Breast procedures and disorders and Female reproductive system procedures)

● Neurology

● Pain Management

● Respiratory Medicine

● Urology (Urological and male reproductive system procedures and disorders)

● Clinical Haematology

● Rheumatology (including Musculoskeletal disorders); and

● Interventional Radiology

18

For example, say a GP practice refers 100 elective orthopaedics patients, of which 40 are referred to the anchor Trust (Trust

A), and 60 are referred to other Trusts as follows: 30 are referred to Trust B, 15 are referred to Trust C and 15 to Trust D. The referral reallocation analysis would reallocate the 40 patients referred to Trust A as follows: 20 patients (i.e. 30/60 = 50%) are reallocated to Trust B, 10 patients (i.e. 15/60 = 25%) are reallocated to Trust C, and 10 patients (i.e. 15/60 = 25%) are reallocated to Trust D.

102

Analysis conducted by the Trusts' legal and economic advisors in December 2017 –

January 2018, suggests, however that there are a number of mitigating factors that

would limit the impact of any decrease in competition in the above areas. In several

of the specialties listed above, discussions between advisors and clinicians have

identified that the level of patient choice suggested by NHSI’s analysis is likely to be

overstated, and that in practice, competition in the market is more limited in some

specialties.

Some of the specialties identified have specialist centres at one of the Trusts, and

hence the services provided by that Trust may be far different than those at the other

two. Of the specialties listed above, there are specialist centres for Cardiology and

Dermatology. The BTUH Cardiothoracic Centre (CTC) is a Centre of Excellence in

cardiology, and cardiac and thoracic procedures. The St Andrew's Centre for Plastic

Surgery and Burns at MEHT is a Centre of Excellence in Dermatology. As such,

referral reallocation analysis undertaken in Cardiology and in Dermatology may not

capture the differences in services, and hence the differences in options for patients,

in these specialties. This will be tested further as we progress the competition

analysis for the merger.

Services provided in a number of specialties listed above are provided via a

collaborative working model, such as a service level agreement (SLA), an integrated

service between some of the merging Trusts or a joint MDT. For instance:

● Breast surgery – an integrated screening service is offered together by BTUH and SUHFT, and SUHFT provide oncology services for breast cancer patients across the three Trusts

● Urology – a joint MDT is held for urology patients between the three Trusts, and urology cancer surgery is conducted at SUHFT for patients from across the three Trusts

● Dermatology – BTUH provides dermatology services at SUHFT under an SLA

● ENT – inpatient ENT surgery is conducted at MEHT for patients across the three Trusts

● Oral/maxillofacial surgery – inpatient ENT surgery is conducted at MEHT for patients across the three Trusts; and

● General/colorectal surgery – a joint MDT is operated for the three Trusts

Additionally, for a number of the specialties listed above, there are other healthcare

providers who provide plausible alternatives for patients and which the Trusts

consider to currently compete with them for patients. These other Trusts are,

however, likely to be located further away than the merged Trusts are from each

other, at least in some cases, and therefore it will be necessary to scrutinise for each

individual specialty, how likely it is that patients currently choosing the merged Trusts

would look at these other providers when considering where to receive treatment.

These other providers include:

103

● Colchester Hospital University NHS Foundation Trust

● Princess Alexandra Hospital NHS Trust

● Barking, Havering & Redbridge NHS Foundation Trust

● Papworth Hospital NHS Foundation Trust

● Dartford and Gravesham NHS Trust

● Homerton University Hospital NHS Foundation Trust; and

● London trusts which take patients in services such as cardiology (Barts Health NHS Trust, University College London Hospital, Royal Free) and ENT (Guy's and Thomas' NHS Foundation Trust)

Overall, despite these mitigating factors, it is likely that the CMA will consider that

there is at least a realistic prospect of an SLC in a meaningful number of specialty

areas, as a result of the merger. As the merger being considered is between three

Trusts, the referral reallocation ratios are generally higher than where a merger

between two parties only was being considered; based on the threshold of 40%

reallocated referrals used by the CMA in previous cases (e.g. Birmingham and

Manchester), a sizeable number of specialties surpass this threshold. If the CMA

maintains this threshold and does not accept mitigating arguments – such as those

listed above - it is likely that the CMA will identify an SLC during a Phase 1 review.

Patient benefits which are likely to meet the CMA’s criteria 8.3.4.

Work conducted by the Trusts’ legal and economic advisors to date also suggests

that there are a number of patient benefits which are expected to ensue from the

merger and which would meet the CMA’s threshold of being genuine improvements

for patients, being merger-dependent, and being likely to occur in a reasonable time

after completion of the merger. These patient benefits are considered by the Trusts

to far outweigh any lessening of competition between the Trusts, and hence on

balance, the merger will substantially improve patient outcomes and experiences, as

compared to a no-merger scenario. Hence, these benefits should be articulated to

the CMA through a robust and compelling PBC. The benefits highlighted can then be

weighed by the CMA against any SLCs it may find in its review of competition.

Details of patient benefits considered are discussed in section 4, however, further

work is necessary to develop a PBC to an evidentiary standard that is sufficient to be

accepted by the CMA as Relevant Customer Benefits. A core part of this work will be

to articulate how the reconfiguration and changes proposed so far are dependent on

the merger, and also to illustrate any cross-cutting benefits already felt as a result of

the current joint working. For some changes where initial implementation may be

possible through the JEG structure, as discussed in section 3.3.5, the continuation

and safeguarding of these changes is dependent on a full merger, and this would

need to be explained as part of the PBC.

104

The Trusts’ proposed approach to engaging with the CMA 8.3.5.

As set out in section 8.3.1, the CMA is likely to find an SLC during a Phase 1 review.

In order to achieve a Phase 1 clearance, therefore, the CMA would likely need to find

that there are patient benefits that offset the SLC. Even for a Phase 2 review, it is still

relatively likely that the CMA will identify an SLC, and therefore rely at least to some

extent on patient benefits if it is to clear the merger.

Our proposed approach to engaging with the CMA is, therefore, to prioritise

developing a strong, well-evidenced and full PBC. The PBC will present robust

evidence, including where possible, quantification, of benefits expected for patients

from the merger. Significant benefits, impacting a substantial number of patients will

need to be identified.

The Trusts have already undertaken significant clinical engagement in relation to

certain areas of patient benefits, and more work is already progressing to develop

the patient benefits case specifically for the CMA process. Engagement has already

commenced with NHSI, and will continue throughout the process, so that benefits

are developed which are most likely to meet the CMA’s criteria and provide the level

of detail and evidence that NHSI requires.

Following early discussions with NHSI, the Trusts plan to focus attempts on a

Phase 1 clearance, and do not plan to fast-track the case to a Phase 2 review as this

does not provide any real time or cost saving for the Trusts. Given the above, a

robust PBC is key to a Phase 1 clearance, and if a Phase 1 clearance is

forthcoming, this will involve a shorter timescale until CMA clearance as compared to

a fast-tracked Phase 2 reference. While there may exist a risk of Phase 2 referral

regardless, a full Phase 1 review will allow the Trusts to better prepare for a potential

Phase 2 referral.

8.4. Programme governance structure

The next stage of the programme will continue to be overseen by the Programme

Board chaired by Nigel Beverley and attended by Non-Executive Directors from each

of the three Trusts, the Chief Executive, Chief Financial Officer, Programme Director

and representatives from NHSI. The incoming Chief Commercial Officer (Jonathan

Dunk) will succeed the Deputy Chief Executive as the Senior Responsible Officer

(SRO) for the transaction. The Programme Board will oversee the merger process

and make recommendations for consideration by the Joint Working Board and the

individual boards of the three Trusts. The Programme Board will be supported by two

Steering Groups (one for Clinical Services and one for Corporate Services) that will

oversee the detailed work on integration in these areas as well as the Delivery Group

that will meet fortnightly to discuss operational matters and interdependencies. The

Delivery Group will be attended by the delivery leads from each of several dedicated

workstreams. This is summarised in the following figure.

105

Figure 8.1: Programme governance

8.5. Workstreams

The key workstreams are summarised below, including the workstream lead and an

overview of the requirements.

Business Case, Organisational Development and PTIP

SRO: JEG Chief Commercial Officer (CCO) for the Business Case, JEG Deputy CEO for Organisational Development and PTIP

Delivery lead: Programme Director / Group Director for People Strategy

There are two products from this workstream, a Business Case for the merger and a Post Transaction Integration Plan (PTIP). Organisational development will support the development of the PTIP by specifically focussing on:

● Cultural integration proposals and supporting positive engagement with staff around the transformation agenda

● Developing and supporting internal teams to deliver the transaction and broader transformation agenda

● Alignment of the merger with broader transformation objectives

● Alignment of the merger with partnerships in the local health economy including dialogue with the STP

The Business Case will follow a similar structure to the Strategic Case with additional levels of detail included on each phase. Workstream leads will work with

Programme Board (monthly)

Chair: CEO. Attending: NED for each Trust, Deputy CEO, CFO, Medical Director, Programme SRO, NHSI

Delivery Group (fortnightly)

Jonathan Dunk (Programme SRO), Danny Hariram (Programme Director), PMO and Workstream Delivery Leads

Joint Working Board

(quarterly)

Basildon & Thurrock

Trust Board

Mid Essex

Trust Board

Southend University

Hospital Trust Board

Committee in Common

(key decision-points)

Business Case

SRO: Jonathan Dunk, CCO

Delivery: Owen O’Sullivan

Clinical Strategy & Patient Benefits

SRO: Celia Skinner, CMO

Delivery: Charlotte Williams, Jenny

Davis, and Owen O’Sullivan

Finance

SRO: James O’Sullivan, CFO

Delivery: Veronica Watson

Corp. Governance, Legal & DD

SRO: Jonathan Dunk, CCO

CG Delivery: Andrew Stride

Legal Delivery: James Day

Clinical Governance & Safety

SRO: Diane Sarkar, CNO

Delivery: Rebecca Martin

IT & Informatics

SRO: Martin Callingham, CIO

Delivery: Alan Tuckwood

Workforce

SRO: Mary Foulkes, CHR

Delivery: Thenji Ndiweni

Capital & Estates

SRO: Paul Kingsmore / Jonathan Dunk

Delivery: Simon Myles

Organisational Development & PTIP

SRO: Tom Abell, Deputy CEO

Delivery: Danny Hariram

Corporate Integration SG (monthly)

Chair: CCO

Clinical Integration SG (monthly)

Chair: CMO

Work

str

eam

s / C

on

ten

t d

eve

lop

me

nt

Ove

rsig

ht

Decis

ion

106


the Programme Director to populate these sections.

The PTIP will set out the planning, processes and governance arrangements that will need to be developed and implemented to ensure the Trusts have a robust integration. This will include detailed plans that describes the work needed in each are of the Trusts for Day 1 readiness, Day 100, the first year and beyond. It is currently proposed that there will be two Steering Groups reporting to the Programme Board covering integration of different services:

● Corporate Integration: to oversee the merger of corporate functions including HR, information, Estates, Workforce, Communications and Engagement. OD plans will set out a way forward for the Merged Trust. This workstream will also oversee external regulatory compliance.

● Clinical Integration: to oversee the merger of clinical services including realisation of clinical service-related patient benefits and operational improvements. This will include Clinical Support Services. The group will oversee smooth transition to the Merged Trust including safety and quality of services on Day 1 and beyond, including CQC registration.

The Chairs of the two Steering Groups will report into the Programme Board that will oversee and drive the integration programme in those areas. The Programme Board will report into the Joint Working Board and three Trust Boards meetings as a Committee in Common. As the transaction progresses past the transaction date and into the first year, the Programme Board will increasingly transfer activities and responsibilities to business-as-usual.

The resource identified to support integration includes managers, clinicians and representatives from the Finance, HR, Health Informatics and Transformation Teams. With active engagement of staff representatives, the Integration Programme will place a strong emphasis on safety, performance, and financial management during the transition whilst also focusing on the delivery of benefits the merger.

Planning will be performed in accordance with NHSI’s guidance document ‘Supporting NHS providers: guidance on transactions for NHS foundation trusts.’ The PTIP itself will contain details of:

● Governance arrangements and timelines for changes including those of the integration process itself and the configuration of the post-transaction team with roles/responsibilities for delivery of the PTIP and implementation

● Activities for the transitional period leading up to the completion date of the transaction – to meet objectives for Day 1

● Plan and timelines for all management changes

● Plan and timelines for service consolidation, laid out by individual specialities and services

● A clear path from the current state to the future structure of the post-transaction organisation’s clinical services

● Guidance as to the timing of costs, cost savings and revenues specifically deriving from the post-transaction programme

o A clear layout of the detailed plans to allow evaluation of progress against trajectory

107


o Specifications of changes to clinical services, cross-referenced with the full business case and benefits case, incorporating public and staff consultations where required

o A complete list of planned changes to clinical services from those currently offered by the three Trusts

● A summary of key risks inherent in the plan including the magnitude of risks, nature of risks, and their likelihood and a risk management strategy to mitigate risks identified in the PTIP

Clinical Strategy and Patient Benefits

SRO: JEG Chief Medical Officer (CMO)

Workstream lead: New Care Models Director, Clinical Redesign Director and Clinical Support Services Director

The workstream will have two key outputs relevant to the transaction:

● Integration plans associated with Clinical Services and Clinical Support Services that will feed into the PTIP workstream. This will include defining how they will operate as integrated services across three sites; and

● Evidence base for the PBC that will form part of the CMA submission, specifically quantifying the benefits identified

This workstream will also input to clinical transformation work as part of the broader service reconfiguration proposals in the PCBC and to the estates business cases necessary to deliver the patient benefits.

Finance

SRO: JEG Chief Financial Officer (CFO)

Workstream lead: Deputy Director of Finance for Mid Essex

The workstream will have three key outputs relevant to the transaction:

● Consolidation of the financial impact of the merger with the underlying financial forecasts for the three Trusts to demonstrate the financial position of the Merged Trust. This will include a Transaction LTFM to be submitted alongside the Business Case document to NHSI

● Ongoing support with quantification of integration plans in the PTIP in terms of costs and benefits; and

● Analysis of the outcomes impact of transformation initiatives associated with the transaction

This workstream will also input to integration work as part of the broader service reconfiguration proposals in the PCBC and to the estates business cases necessary to deliver the patient benefits. It will also report directly to the Programme Board on the consolidated financial position for the Merged Trust.

108

Workforce, IT, and Estates

SROs: Chief HR Director, Chief Information Officer and Chief Commercial Officer respectively

Workstream lead: Group HR Director, Head of Digital Services and Group Director of Capital Projects respectively.

These enabling workstreams will have key outputs relevant to the transaction:

● Workforce: supporting the integration planning in relation to workforce issues, such as changes in terms and conditions, any TUPE arrangements associated with the transaction and redundancy planning where relevant and driven by the PTIP process. Also analysis of the workforce impacts (people and costs) associated with service reconfiguration

● IT: Defining the IT solutions and resource requirements associated with the merger. Also setting out proposals for integration of the IT functions of the Trusts

● Estates: Defining the estates solutions and resource requirements associated with delivering the merger and as identified by the PTIP process. Also developing plans for integration of the Estates functions of the Trusts

Governance, Legal and Due diligence

SROs: Chief Nursing Officer (Clinical Governance & Safety), Chief Commercial Officer (Corporate Governance, Legal and Due Diligence)

Workstream lead: MEHT Deputy Medical Director (Clinical Governance & Safety), BTUH Company Secretary (Corporate Governance) and MEHT Company Secretary (Legal and due diligence)

Clinical governance and safety

Clinical governance and safety will be overseen by the deputy medical director and key outputs will be setting out how clinical quality will be maintained and reported on during the transition process as well as following the transaction date. This will include oversight over matters related to CQC registration.

Corporate governance and legal

Corporate governance and legal workstreams will work with the PTIP team to develop plans in relation to work on the following outputs:

● Constitution of the Merged Trust

● appointment of governors and board members

● Heads of Terms and Business Transfer Agreement; and

● TUPE where required

External legal advisors will continue to be appointed to support the process and provide technical input.

Due diligence

The Trusts will plan and undertake a programme of due diligence as part of the Business Case development. Due diligence will be undertaken on each of the three Trusts in the following areas:

● Clinical and operational, including IT and Estates

109

● Financial

● Commercial

● Legal

The output will be reports will be:

● to identify risks that may impact the decision of Trust boards as to whether to proceed with the transaction; and

● to support the development of a robust integration plan through incorporating mitigations to the risks identified during due diligence

The scope of the due diligence programme will be based on the model scopes within NHSI’s transactions guidance. The programme will be delivered by a combination of internal and external teams to ensure the best use of internal knowledge and expertise and external specialist knowledge and challenge where required.

8.6. Indicative programme costs

Indicative programme costs related to the costs of delivering the merger transaction

successfully. To ensure value for money our current estimates are based on delivery

of the programme through a combination of internal teams where possible supported

by external technical advice and capacity where necessary. These costs are those

assumed to all occur within 2018/19 prior to the assumed go live date of 1st April

2019. The internal resources would also continue with implementation during

2019/20 and 2020/21.

● Internal transaction resources: ~50 staff (30 FTE staff) across the workstreams with an indicative cost of £3.0m (to be Trust funded existing group transformation roles). The estimate includes:

o Oversight and programme support (£0.7m)

o Integration and transformation (£1.5m)

o Analytics and finance (£0.4m)

o Capital and estates (£0.4m)

● External transaction resources: £2.5m assumed at this stage (£2.0m of which falls in 2018/19) including support with:

o Transaction and business case support;

o Integration and patient benefits case for CMA;

o Due diligence (clinical, operational etc.) on the respective Trusts;

o Legal support on the CMA case, contractual due diligence, statutory requirements and transaction; and

o Reporting accountant role.

● Broader transformation resources: Over a five year period from 2018/19 to 2023/24 the delivery of almost £150m of recurrent CIPs and merger savings is estimated to require a non-recurrent spend on transformation of £47.4m. This

110

includes the £5.5m of costs above related to the merger transaction described above as well as further revenue based transformation costs associated with the following:

o Workforce design, corporate design and OD planning associated with multi-site working

o Strengthening performance management

o Development of a Strategy Unit to reduce reliance on external support in the future; and

o Digital transformation

The Trust will use in house resources where possible to ensure value for money and

external technical advisors where necessary. Over the 5 year period it is estimated

that a further £7.2m of spend will be made with external advisors, primarily in relation

to delivery of the digital agenda, corporate redesign, workforce planning across three

sites and the development of strategy unit that will reduce the need for external

support in the future.

It is assumed that £15m of the total transformation cost will be funded from existing

Trust resources (£3m per annum over 5 years). Whilst commissioners are strongly

supportive of the merger transaction, the STP status as a troubled health economy

means that no transformation funding is available through that route and therefore it

is currently assumed that, principally for 2018/19, this will need to be agreed as part

of a revised operational plan with NHSI. The costs of transformation funding in future

periods from 2019/20 onwards are forecast to be offset by the delivery of merger

synergies and additional STF.

8.7. Stakeholder engagement plan and strategy

The section below sets out the key points of engagement to date and the principles

for engagement in the next phase. A full communication and engagement strategy

will be developed as part of the next phase.

In January 2017, all three boards voted to support the recommendation to start the

formal process to merge the organisations. All recognised that working together

formally in the longer term is crucial to help us deliver and secure safe, high quality

services across all three hospital sites.

The three Trusts are committed to demonstrating how this gives something better for

patients in mid and south Essex and there will be lots of opportunity going forward to

engage more fully.

The Trusts also recognise the fundamental importance of consulting with staff and

stakeholders to determine how to build a future organisation that not only celebrates

individual success but embraces a common goal in providing and safeguarding high

quality services that are the best possible provision for the local population.

111

There are a number of considerations which have shaped the approach to

communications and engagement not least the recognition that any proposed

changes to NHS services or organisations can be worrying for patients, staff, the

wider public and stakeholders and it is therefore essential to enable full and thorough

dialogue with all partners to ensure those plans are robust.

The Trusts will mirror the stakeholder engagement plan from the recent STP

consultation regarding the reconfiguration of acute services and will adhere to the

following principles:

● Clear, understandable and consistent material and messaging

● A focus on practical information and planned benefits, not process

● Be open and transparent addressing concerns as they present

● Work with and through existing networks and relationships to broaden reach and impact, especially with harder to reach communities

● Use the most appropriate channels and language for the audience based on feedback from surveys

● Regularly test understanding of language, use of channels and impact of activity through public/ staff/stakeholder opinion surveys

● Equality Impact Assessment (EIA) screening is underway and a full EIA will be undertaken for any appropriate changes

● Utilise all existing communications channels including digital and social media to maximise reach and value for money

8.8. High level benefits realisation strategy

The benefits realisation plan will be developed as part of the PTIP phase of work and

will be tracked following the transaction ‘go live’ date as set out in section 8.2.

The benefits realisation strategy will be for changes underlying patient benefits to be

managed/facilitated by improvement teams, and with a Change Management Office

(CMO) that tracks the progress of change projects/programmes across the three

Trusts. Additionally, the MSB Trusts’ gateway process will evaluate projects at

specific stages to ensure sufficient progress is made against objectives.

Individual change projects underlying patients benefits will have clearly identified

owners and dedicated resources to enable change in the form of improvement

teams. At the same time, a holistic view of the programmes of change linked to the

merger and oversight of the progress over change enabling patient benefits will be

provided by the CMO. This will ensure that change projects are joined-up (via the

CMO), and that each individual project has sufficient resources and internal support

to maximise chances of successful delivery of patient benefits.

The MSB Trusts will track and evaluate the benefits that are identified as dependent

on the merger, building on our gateway process for implementing change

programmes. The purpose of the gateway process is to examine programmes and

112

projects at key decision points in their lifecycle, providing assurance that they can

progress successfully to the next stage. Specifically, this process has five gateways:

● Gate 1: Approval of mandate to scope out a project

● Gate 2: Approval of scope

● Gate 3: Approval of business case/delivery plan

● Gate 4: Assurance that intended benefits are being delivered and transition to business as usual; and

● Gate 5: Project closure and lessons learnt

Proposals submitted through the gateway process are reviewed by the Group

Portfolio Steering Group (or its successor in the merged Trust), and where relevant,

through external specialist peer review. At a minimum, the mandate to scope out

changes (gate 1) and the approval of the scope of changes (gate 2) will be

completed ahead of the merger transaction date for projects to implement merger-

dependent changes. However, as the MSB Trusts are keen to ensure prompt

realisation of patient benefits, many planned changes will likely have approval of

business cases/delivery plans (gate 3). Assurance of benefit delivery and transition

to business as usual (gate 4) and project closure and lessons learnt (gate 5) will

likely occur after the transaction date, once the planned changes have been

sustainably embedded within the functioning of the merged Trust. The gateway

process will ensure sufficient review of progress against project objectives, and will

provide a robust assessment of the benefits, changes, potential risks and mitigation

steps from clinical changes.


If the Strategic Case is approved in May 2019, the Trusts will progress to the

Business Case stage of the merger process.

The programme team and structure set out above will be put in place to deliver a

merger by April 2019.

113

9. Risks

The risks to achieving a preferred option for a merger that is jointly agreed by the

MSB Trusts’ Boards have been identified, documented, and tracked throughout the

development of the Strategic Case.

A Transaction Risk Register to reach the Business Case stage, is reviewed and

managed weekly at the Delivery Group with key risks considered monthly at the

Programme Board and at the MSB Group Joint Working Board. The risk register

includes identification of a risk owner, likelihood of the risk being realised, the

consequence of the risk being realised and mitigation actions to give a risk score;

see Appendix 1. It is also noted that the integration planning process will include

consideration of how business as usual risks will be managed and reported

alongside these transaction specific risks.

At this stage the key risks to proceeding with the transaction (including mitigations

that have been put in place) are set out below.

Risk Description Mitigation

Team capacity and experience to deliver the transaction

Risk of delay caused by:

● Internal change management resources may not be able to satisfy the needs of the service reconfiguration processes such as the Consultation process and the Clinical Senate and the Business Case for the merger and the Capital re-development processes at the same time. This includes the improvement team, analytics team and finance

● Availability and time of clinical leads to work on detailed pathways is insufficient, leading to the inability to articulate service reconfiguration or integration

● Allocation of clear roles and responsibilities to team members that include work on the merger

● Developing internal programme management team associated with the transaction

● Support from NHSI teams that have delivered similar processes before

● Support from external advisors that have delivered similar


The MSB Trusts’ approach to managing risks

The risk management process utilised

A description of the transaction risks identified to date and the mitigations in place

114


plans

● There is a lack of experience in relation to writing key documents for the next phase including the Patient Benefits Case for the Competition & Markets Authority, the Post Transaction Integration Plan and the Transaction Business Case

processes before

Consultation on

service

reconfiguration


● The PCBC not receiving timely approval from commissioners

● Challenge during or subsequent to the public consultation on the proposed service reconfigurations set out in the PCBC (JR challenge can be made up to three months after the decision).

● Engaging proactively with key stakeholders in the service reconfiguration including patients, public, staff, commissioners and regulators

Interim

performance of

the three Trust

and staff

engagement

Risk of performance at the three

Trusts during the period prior to

transaction including:

● Financial performance against the operating plans, including risks associated with spend on the transitional costs associated with the merger and broader transformation programmes

● Operational performance is not effectively managed during the transition period

● Staff are disengaged with the process

● Close management of in year CIP programmes at site and JWB level

● Close management of operational performance indicators at site and JWB level

● Separation of roles and responsibilities between people working on business as usual and those working on transformation

● Focus on detail of accountability arrangements in the integration planning

● Communications and staff engagement plan

Planning for

implementation

Risk of a poor outcome due to:

● Not recognising or addressing differences in culture between the organisations

● Benefits of the merger are not clearly articulated leading to risks

● Cultural surveys and OD workstreams

● Effective integration planning and programme management to link to

115


of double counting or the costs of delivery not being understood

patient outcomes and financial impact

● Clear separation of synergies and CIP programmes as part of financial workstream

Approvals to

proceed

(potentially linked

to some of the

above risks)


● Failure to agree funding for transaction costs

● Commissioners not expressing support for the transaction due to concerns with service plans or lack of engagement

● Governors not expressing support for the transaction due to lack of engagement

● NHSI not approving the Strategic Case and subsequently not being able to proceed to more detailed work on the PTIP and Business Case

● NHSI regional and/or national teams not approving external support required to deliver the transaction effectively and efficiently

● NHSI not approving the capital business cases and/or not being able to give assurance to the CMA over the deliverability of the patient benefits

● CMA not approving the merger when balancing the gains in patient benefits with any perceived loss of competition

● Engagement with commissioners, Governors and NHSI in relation to planning, key decision points and next steps

● Sharing early drafts of key documents with NHSI and seeking challenge at an early stage

● Support from NHSI teams that have delivered similar processes before

● Support from external advisors that have delivered similar processes before

There will also be a need to focus during the merger process on the risks of the

transaction not being a success. These will be managed and mitigated in a similar

method to those for the transaction specific risks.

116

10. Conclusion

The Strategic Case sets out the following key points for the Boards of each of the

three Trusts and NHSI to consider:

● There are national challenges facing the NHS and an overarching aim for closer collaboration between NHS providers to address this

● There are also challenges facing the local health economy in mid and south Essex as reflected in the legacy of the ESR

● The existing Group Model is not sustainable and although it has enabled some of the planning for how to address these challenges, it is not sufficient to deliver the scale and type of change needed. Specifically it does not remove the misalignment of incentives or the barriers created by maintaining three separate statutory organisations

● That a merger is the preferred option for the future organisational form of the three Trusts as it is the model best suited to delivering:

o the nature and pace of change required to deliver improvement in health outcomes for the local population; and

o the financial savings required to deliver a sustainable health economy, including delivery of models that will enable out of hospital care

● The Trusts’ assessment is that it will require transformation costs of £47.4m over the next five years. This is required to deliver the proposed transformation of the health and care system (including improved outcomes and recurrent CIPs and merger synergies of approximately £150m). For 2018/19 this includes £12.0m of transformation costs of which £3.0m is being funded from existing Trust resources. The transformation will use in-house teams where there is the capacity and capability, or roles can be easily backfilled and external resources where necessary. It is assumed £2.5m will relate to use of external support (£2.0m of which falls in 2018/19) to deliver the detailed merger transaction work.

On that basis it is recommended that the Board for each of the three Trusts and

NHSI approve the following:

● The Strategic Case for a merger between the three Trusts – confirming that any additional risk factors can be appropriately considered during the next stage of work and prior to transaction completion

● To proceed to more detailed work on the merger both to obtain the necessary regulatory approvals and to make the transaction a success. This includes:

o Due diligence on the Trusts as required to give assurance to the NHS Boards, NHSI and the Secretary of State over the suitability of the proposed transaction

o Development of a PBC for the benefits deriving from service reconfigurations that are enabled by the merger

o Development of a Business Case for the merger that will be approved by each of the three Trust Boards and NHSI

117

o Development of a PTIP to define how the three NHS Trusts will integrate effectively on Day 1, Day 100 and thereafter

In summary, we present this Strategic Case to you and recommend its suggested

direction and the proposal to build on this work and develop the preferred option for

merger through the development of a Transaction Business Case, PBC and PTIP.

118

Appendix

The Strategic Case is supported by the following documents some of which are

available below and others that will be made available to NHSI alongside the final

deliverable.

Appendices below include:

Appendix 1: Transaction risk register

Appendix 2: Commissioner Letter of Support

Appendixes that will be made available on request to the Trust Boards and NHSI

alongside the final deliverable:

CQC inspection reports for each Trust

Well Led reports

Board minutes acknowledging the outcomes of the options appraisal

Draft stakeholder engagement plan

119

Appendix 1: Transaction Risk Register

Below is the scoring methodology applied for the Transaction Risk Register.

Criteria Likelihood

Imp

act

1 Rare 2 Unlikely 3 Possible 4 Likely 5 High

1 Negligible 1 2 3 4 5

2 Minor 2 4 6 8 10

3 Moderate 3 6 9 12 15

4 Major 4 8 12 16 20

5 Catastrophic 5 10 15 20 25

Below is the Transaction Risk Register for which the key risks and mitigating actions have been summarised in section 9 of the

Strategic Case.

120

Capacity/C

apability

R5 Group Lack of dedicated resource across workstreams (and

supporting analytical and finance resources) may

result in a delay to the process.

Jan-18 4 4 16 Workstream leads with

dedicated time to the

programme have been put in

place. The group has also

engaged KPMG to support the

process.

3 3 9 Danny

Hariram

Operational R6 Clinical & Pt

benefit

Variability in the progress of the development of 4

key specialities - Gynae, Gastro, General Surgery

and Respiratory leads to insufficiently developed

plans in one area, undermining the Strategic Case

and CMA submissions (patient benefits case)

ultimately increasing the risk of delays arising from

fulfil consultation requirements or failing to satisfy

regulators.

Jan-18 3 4 12 Named project resource has

now been allocated to each

speciality to help push forward

development of models.

Meetings with all three trusts

are in the diary. General

Surgery and Respiratory are

likely to be prioritised for

patient benefit case, however,

all specialities will be worked

up to a minimum standard with

clinical senate template

2 4 8 Danny

Hariram

Capacity/C

apability

R7 Clinical & Pt

benefit

Focus on patients benefit case is prioritised, leaving

limited capacity for detailed financial modelling and

linking the LTFM

Jan-18 4 4 16 Finance and clinical

workstream to work closely

together, with finance

retaining responsibility for

financial analysis, but the

clinical workstream owning the

underlying assumptions.

2 3 6 Veronica

Watson

Strategic R8 Clinical & Pt

benefit

PCBC and Public Consultation concludes with either

service plans or finances that are not aligned with

merger plans, creating delays while plans are

reconciled.

Jan-18 3 4 12 Work up of the outcome of

the consultation, clinical

senate requirements, and the

patient business case to all be

aligned to the same pathway

templates, service

specifications and data sets

2 4 8 Jenny

Davis

Capacity/C

apability

R9 Clinical & Pt

benefit

Capacity within the Improvement team, analytics

team and finance is insufficient to satisfy the needs

of both the clinical senate and the Strategic Case for

the merger.

Jan-18 4 4 16 Requirements for the clinical

senate and patient benefits

case to be prioritised as areas

of focus over April to June.

Additional Improvement and

analytics support to be

provided. Overarching

support to pull together the

patients benefits case to be

supported through KPMG

3 4 12 Danny

Hariram

Capacity/C

apability

R10 Clinical & Pt

benefit

Lack of experience/expertise within the team of

having written a patient benefits case previously leads

to the production of a PBC that does not satisfy NHSI

or the CMA and causes delays and additional costs.

Jan-18 4 5 20 Support from consultancy

agencies who have previously

written cases

3 4 12 Danny

Hariram/K

PMG

121

Capacity/C

apability

R11 Clinical & Pt

benefit

Availability and time of clinical leads to work on

detailed pathways is insufficient, leading to the

inability to articulate service reconfiguration or

integration plans, delaying the requirements for the

clinical senate, Strategic Case and patient benefits

case.

Jan-18 4 5 20 Project meeting structure

already in place. Where

possible utilising appointed

clinical leads

3 4 12

Strategic R12 Governance Lack of support from Governors might delay or

ultimately block the merger

Feb-18 4 5 20 regular engagement with

governors in place with

commitment to engage

further, still need to engage

with MEHT Patient Council.

Governors' role as approving

the process (not the content)

to be made clear.

2 4 8 Andrew

Stride/Brin

da

Sittapah/Ja

mes Day

Capacity/C

apability

R13 Group Insufficient internal and external resource is made

available to develop the Full Business Case, the PTIP

and the CMA submissions (patient benefits case and

merger notice) to a sufficiently high standard and at

sufficient pace for the regulators to approve for an

April 2019 merger date.

Feb-18 4 5 20 A scoping exercise is

underway for the next phase

of the merger planning

process

3 4 12 Danny

Hariram

Strategic R14 Comms and

engagement

Staff are insufficiently engaged in the process,

leading to an increased rate of staff churn due to

anxiety about the merger

Feb-18 4 4 16 Comms and engagement

workstream to plan and deliver

a cultural survey and broader

staff engagement plan. [Hr

input required here]

3 3 9 Victoria

Parker/Da

nny

Hiriram


engagement

Staff are insufficiently engaged in the process,

leading to a lack of support internally and delays and

difficulties with agreeing integration plans for the

merged trust.



a cultural survey and broader

staff engagement plan

3 3 9 Victoria

Parker

Strategic R16 Group Failure to engage CCGs and other non-acute Trusts

in region leading to an acute focused merger which

doesn't deliver required system change.

Apr-18 4 5 20 Significant engagement with

CCGs and non-acute Trusts to

get buy-in to the case for

change.

3 5 15 Danny

Hariram

Strategic R17 Group Public concerns regarding the merger are

inadequately addressed, leading to adverse publicity.

This may affect staff morale, prompt political

involvement and cause delays.



a public engagement plan

3 3 9 Victoria

Parker

Strategic R18 Group Failure to consider interdependencies between

workstreams leads to an inconsistent Strategic Case

which is not fit for purpose, causing delays and

additional costs to rectify.

Feb-18 3 4 12 Weekly project delivery group

meetings have been

established to discuss plans

and key risks and issues. An

extended session has been

arranged to share the plans

for each workstream in detail.

Sufficient time has been

allowed in the timetable to

review for interdependencies

with the support of KPMG.

2 3 6 Danny

Hariram

122

Strategic R18 Group Merger plans are not aligned to the capital business

case process, leading to an inability to implement

service change as planned.

Mar-18 5 4 20 An estates workstream lead

has been identified and is part

of the project delivery group.

KPMG are supporting on the

estates business case

process and coordinating with

the merger programme. A

workshop is being held to

align capital cases and patient

benefits.

4 3 12 Simon

Myles/Jenn

y Davis

Strategic R19 The new organisation is structured in such a way that

the benefits of the merger cannot be realised

Apr-18 4 4 16 Strong programme

governance put in place

projects to ensure benefits

realisation and tracking of the

various projects. Ensure

pragmatic and realisable

benefits articulated in the

Strategic and Business Case.

3 3 9 Danny

Hariram

Strategic R20 Operations Culture differences are not fully understood and

recognised, preventing the aims of the merger from

being realised and impacting negatively on staff

morale

Apr-18 3 4 12 Organisational Development

plan put in place and

embedded to ensure that new

organisation has appropriate

culture in place for success.

3 3 9 Danny

Hariram


engagement

Local organisations do not support the merger and

external collaboration is negatively impacted

Apr-18 3 4 12 Strong and consistent

communication with external

organisations to ensure

support and active

engagement

3 3 9 Victoria

Parker

Transformat

ion

R23 Finance Transaction and transformation costs are not funded

as assumed in the financial case

Apr-18 2 5 10 Develop a clear financial

model that is supported by all

three Trusts, as laid out in the

Strategic Case

1 5 5 Veronica

Watson

Transformat

ion

R24 Group Phase 1 clearance is not approved, leading to delays

in timelines

Jan-18 3 3 9 Continued engagement with

NHSI throughout the

development of the Phase 1

Strategic Case, with particular

focus on the Patient Benefits

Case. A full Phase 1 will

provide added assurances

3 2 6 Danny

Hariram

123

Appendix 2: Commissioners Letter of Support

Documents

Proposed merger of Mid Essex Hospital services NHS Trust ... · Trust (BTUH); hereafter collectively referred to as “the MSB Trusts”. The ambition is to create a financially sustainable