Review of Henderson Business case

TB(07)127




Trust Board

7 December 2007

Report Title Review of Henderson Business case

Purpose Appraise the Trust Board on the progress on the February 2007 Henderson Business Case, provide information about the impact of the commissioning climate for 2008/09 and evaluate options for the future of the Henderson Hospital tier 4 residential personality disorder service.

Equalities This paper reviews the options for the continuation of the Henderson Hospital and suggests the preferred option is planned closure. Community models are being introduced as part of these plans, which will aim to provide care away from stigmatizing inpatient settings.

Assurance & Risk Management This paper reviews progress and suggests closure. Clinical risks will be minimised through a planned transition to an alternative provider and other risks will be clarified through a detailed closure programme.


Legal / Financial
Implications


Closure of the Henderson will limit the financial risk to the Trust.

The commissioners are responsible for finding a suitable alternative provider for tier 4 services and any formal consultation that may be required. The Trust will support this process through assessing the clinical suitability of placements.

Action
requested

Report from

Report Author For the Trust Board agree to the preferred option, planned and phased closure of Henderson Hospital

Maresa Ness, Chief Operating Officer

Sue Denby, Service Director for Sutton






Henderson Hospital Business Case
December 2007 update


1. Executive Summary

1.1 The purpose of this report is to appraise the Trust Board on the progress on the February 2007 Henderson Business Case, provide information about the impact of the commissioning climate for 2008/09 and evaluate options for the future of the Henderson Hospital tier 4 residential personality disorder service.

1.2 South West London and St Georges outpatient remodelling will be reviewed separately. This paper solely focuses on the Henderson Hospital services. Further information about the history of the issues is contained within the original business case.

1.3 The Trust has been progressing service changes in line with the business case since February. However, formal commissioning intentions for 2008/09 were received in October 2007 indicating that all PCTs would be commissioning tier 4 residential personality disorder services on a cost per case basis, rather than through a service level agreement. As a result, the commissioning consortium will cease to function and activity is likely to be at a significantly lower level, which would be unsustainable in the longer term.

1.4 The Trust pursued in-depth work to explore other service alternatives and the strongest option that emerged was a partnership with Turning Point. This held the possibility of the development of an innovative new service, including tier 4 provision, but did not result in a viable plan for consideration within the context of the business case. The work will be progressed separately, as it is unlikely to provide for the current Henderson client group. It is possible that a pilot unit may be introduced, with support from the Department of Health, with an aim to develop personality disorder services for medium / low secure and prison step down.

1.5 Discussion with Commissioners and the Department of Health in November 2007 resulted in the consideration of a further option to work more closely with the Cassel Hospital in the Borough of Richmond. The Cassel also operates a residential therapeutic community operating on psychoanalytic theoretical lines, and may prove to be a useful alternative for some clients in the context of a closure plan for the Henderson.

1.6 The Department of Health has clarified that a submission for national specialist commissioning would not be supported.

1.7 The options considered are:
1. Continuation of a smaller unit and changes to personality disorder services
2. Closure of Henderson

1.8 The original Henderson Business Case is reported against option 1. The Trust has worked with Henderson staff since 2005, when devolution of NSCAG funding was originally planned, to move towards a model more favoured by Commissioners. However, detailed analysis of the range of possibilities has demonstrated that the continuation of a smaller unit is not considered to be financially or clinically viable. The closure of Henderson Hospital (Option 2) is therefore the suggested option. Suitable alternative tier 4 services will need to be commissioned for current and future clients. To aid appropriate planning, care pathways for clients are being explored with commissioners.

2 Background

2.1 The Trust values the service that the Henderson Hospital provides and the unique nature of the care that is provided. In February 2007 the Trust Board approved a business case to provide the Henderson time and ongoing funding to change the model and market its service nationally, as commissioners had signalled their intention not to purchase the available model in the future.

2.2 The Henderson staff and trustwide personality disorder services undertook significant work to redesign services to achieve a balance between income and expenditure and a coherent care pathway. All proposed changes to the clinical model have been fully implemented in line with regional and local commissioner requirements. Further models have emerged, such as partnerships with the private sector, but these have failed to deliver for this client group and it is not felt that the Trust can continue to bear the financial risk as these possibilities are explored.

2.3 As part of the service changes outlined in the business case, there were substantial and complex developments involving commissioners, staff and service users. These developed a community-based hub and spoke models in line with evidence of best practice. Plans are in place for each of the five Boroughs, which aim to manage demand for tier 4 personality disorder services.
3. Options appraisal

Option 1 Continuation of a smaller unit
3.1 The current cost base of the service was reduced significantly during the year to remain within the agreed 2007/08 deficit limit and achieve the planned savings for 2008/09. Henderson staffing was robustly reviewed and a reduced budget set for pay and for non-pay. It is not possible to reduce the staff cost base further without closure of whole or part of the service.

3.2 The current forecast for 2007/08 is now within the deficit limit agreed by the Board of £0.3m.

3.3 The continued cost of the Henderson outreach premises (HOST) in Vauxhall is included for the next four years, and although concerted effort has been made to sublet the premises, this has not been successful.

3.4 In the summer further marketing was carried out to increase the income to the service via cost per case (CPC) activity. This has proved less successful than anticipated and is not likely to have a significant future impact.

3.5 The costs presented include the assumption that inpatient staffing for 2008/09 and subsequent years will further reduce in the light of reduced activity and this will incur redundancy costs.

3.6 There is a block SLA for 2007/08 and therefore income is secure this year despite a lower level of activity than planned. However, it is now confirmed that all PCTs will withdraw from the consortium for 2008/09 and contract solely on a cost per case basis, which leaves the Trust with considerable financial risk. The tariff would need to rise by 62% to cover the costs of the service with the level of activity for 2007/08 and it is not felt that commissioners would be prepared to pay this increase, as they are unwilling to fund at current tariff.

3.7 Cost per case activity and income for 2007/08 is considerably lower than planned. In future years all inpatient income would be through CPC purchasing and as a result the annual budget deficit will increase to £1.3m from 2008/09 onwards.

3.8 In the light of the notice from the consortium, the planned contractual basis for beds 2008/09 and the pattern of referrals to Henderson, despite marketing efforts and financial support from the Trust, the income and activity base is too low for the financial and clinical viability of the service. For these reasons this option is not supported.


Option 2 Close the Henderson Hospital

3.9 This option assumes that new admissions will not be accepted from a given point in time and therefore CPC income for the current year will be lower than in option one. Therefore the deficit forecast in this option for 2007/08 will be slightly higher than the £0.3m forecast for option 1. Redundancy costs could be up to £0.9m as one off costs in 2007/08, but clearly every effort will be made to minimise this cost by seeking redeployment of as many people as possible within other Trust services.

3.10 Rent and associated costs on the Vauxhall site may still be paid over the next four years or until the building can be sublet. To minimise financial impact, savings from the current St Helier SLA for Sutton are being negotiated.

3.11 In the event that the Sutton site becomes surplus to requirements the market value of the site must be assessed by the District Valuer, which may give rise to a write down of the asset value in the Trust balance sheet. It is estimated that this could amount to £0.5m, but this is dependant upon a professional valuation being completed.

3.12 Redundancy costs have been calculated assuming that administrative and clerical staff, psychology and the band 6 nursing staff can be redeployed. The redeployment of these staff within generic adult services will have a positive impact on the development of personality disorder services in line with the strategy. Forecast redundancy costs are associated with more specialist staff. The Trust Management of Change Policy will apply in these circumstances and a 30-day minimum period of consultation will be required.

3.13 Some people experiencing personality disorders will still require access to tier 4 inpatients. New referrals and any current clients requiring treatment will need to be directed to alternative tier 4 provisions from an agreed date. It is likely that the commissioners will use the Cassel Hospital as a suitable alternative and so fulfil their duty to provide these services. This may even mean an expansion of services at the Cassel and the opportunity for some Henderson staff to transfer.

3.14 Current client numbers and the capacity of alternative services require consideration. The Henderson model requires a minimum number of clients for the therapeutic community model to be effective and the numbers of clients using the service may drive the date of closure. Discussion with the Cassel will be required to ascertain their capacity and timescales to develop appropriate services, including staffing requirements. Meetings with commissioners are scheduled to progress these discussions.

3.15 About eleven clients are projected to require alternative provision by April 2008, working from selection dates booked to December 2007. The Henderson staff have the skills and experience to facilitate the transition to the alternative service.

3.16 If the commissioned tier 4 provision is a suitable alternative, formal consultation is not required on closure. Trust solicitors have advised that an assessment of suitable alternatives and any formal consultation is the responsibility and should be lead by the commissioners, with Trust engagement.

3.17 Although the Trust will have to bear redundancy, building and sale costs associated with closure of the Henderson, the ongoing financial risk is substantially less than option 1. All direct costs associated with the Henderson will be saved, but the Trust will retain residual annual overhead costs of £0.6m until such time as these can be eliminated or covered by expansion of Trust services in other areas. If the commissioning discussions with the Cassel are productive, it is feasible to close the Henderson in a planned way on the 31st March 2008. This will ensure a clinically appropriate transition for clients and has the potential to minimise staff redundancy costs.

3.18 If the service were to continue after the 31st March for a phased closure this would incur be at an additional cost of about £125k per month.

3.19 For these reasons, the closure of Henderson before 31 March 08 is preferred the preferred option.


4. Action being requested

4.1.1 The Board is asked to:

I. consider the analysis and approve the option to close the Henderson Hospital as soon as its practicable; and
II. ask the Chief Executive and Chief Operating Officer to continue discussions with the West London Mental Health Trust and commissioners to secure alternative services at the Cassel Hospital; and
III. consider progress against this closure plan at future meetings.


Appendix A – Financial analysis of options

OPTION 1: Continuation of Smaller Unit

Forecast 07/08 08/09 09/10 Total
to 11/12
One-off
Costs
£000 £000 £000 £000

Cost per Case Contract Income -1,141 -3,423 -4,563

Expenditure

Henderson Hospital
Pay 72 1,408 4,224 5,704
Non pay 0 117 351 468
Facilities and overheads 0 665 1,995 2,660

Henderson Outreach
Pay (included within Henderson Hospital Pay) 0 0 0 0
Non pay 0 123 370 493
Facilities and overheads 0 138 414 552

Total Expenditure 72 2,451 7,354 9,877

Deficit 72 1,310 3,931 5,313







Option 2: Closure of Henderson Hospital and HOST by 31st March 2008

Forecast 07/08 08/09 09/10 Total
to 11/12
One-off
Costs
£000 £000 £000 £000

Cost per Case Contract Income 0 0 0

Expenditure

Henderson Hospital
Pay 564 0 0 564
Non pay 0 0 0 0
Facilities and overheads 0 445 1,322 1,767

Henderson Outreach
Pay 319 0 0 319
Non pay 0 0 0 0
Facilities and overheads 0 191 573 764

Total Expenditure 883 636 1,895 3,414

Deficit 883 636 1,895 3,414


Option 2A: Additional Costs of Gradual Closure Over 12 Months with extended running into 2008/09

Forecast 08/09 08/09 08/09 08/09 08/09 08/09
Apr/May Jun/Jul Aug/Sep Oct/Nov Dec/Jan Feb/Mar

Based on 11 clients from April £000 £000 £000 £000 £000 £000

Income -191 -156 -156 -147 -87 -87
Expenditure 409 409 409 409 409 409

Deficit for two months 218 252 252 261 322 322

Total Deficit 1,628