Annual State of NHSScotland Assets and Facilities Report for 2014

4.0 Planned future investment in assets

Planned investment in NHSScotland's assets over the next 5 years is estimated to be circa £2.75bn (based on NHS Boards' 5 year investment plans presented in their PAMS). This will make a significant contribution to improvements in the condition and performance of these assets. It will also further enhance the important supporting role that assets play in the delivery of quality healthcare delivery. This investment will also enable the disposal of older properties which are expected to generate receipts of approximately £200m over the same period (subject to economic and market conditions).

This investment covers all asset types (property, medical equipment, IM&T, and fleet) and will be achieved through a combination of capital and revenue based investment. The following chart provides a breakdown of this investment.

NHSScotland's 5 Year Asset Investment programme of £2.75bn

4.1 Investment in Major Projects / Programmes

Investment in 'Major Projects / Programmes' accounts for 47% of the overall planned future investment described above and includes the key strategic investments planned by each NHS Board. They will be funded mainly though NHS Board capital or NPD / hub revenue based funding. The following chart provides a breakdown of the £1.3bn of investment associated with these major projects / programmes.

Total Investment in Major Projects / Programmes (£1.3bn)

4.2 Investment in Primary and Community Care

In addition to the £1.3bn of investment on the major projects / programmes (which includes some larger Primary and Community Care projects) described above, a further £245 million is planned for new primary & community care projects. This investment is key to delivering the emerging Health and Social Care Integration agenda and shifting the balance of care from hospitals to local facilities and people's homes.

4.3 Income receipts from asset disposals

A direct consequence of investment in new facilities can often be a surplus of older accommodation no longer required for operational purposes. Boards have identified in their PAMS planned disposals of these surplus properties are expected to generate income sale receipts of over £200m over the next 5+ years. Scottish Futures Trust is actively supporting NHS Boards to maximise the potential of income receipts from these disposals.

The programme of anticipated income receipts per NHS Board over the next 5+ years are listed in the following table, but these are subject to change dependent upon economic and market conditions at the time of sale.

NHS Board	Anticipated Future Income Receipts from Disposals (£m)
NHS Greater Glasgow & Clyde	87.0
NHS Lothian	34.6
NHS Tayside	10.0
NHS Grampian	12.1
NHS Fife	7.1
NHS Ayrshire & Arran	7.5
NHS Lanarkshire	17.0
NHS Highland	13.4
NHS Forth Valley	13.1
NHS Dumfries & Galloway	1.5
NHS Borders	1.1
NHS Western Isles	0.5
NHS Shetland	0.4
NHS Orkney	0.2
NHS National Services Scotland	5.0
Scottish Ambulance Service	0.6
TOTAL:	£211 million

4.4 Investment required on vehicle assets

As described earlier in this report, many of the NHSScotland vehicles are leased and, therefore, the replacement cost of these vehicles is effectively included within the annual leasing costs. However, substantial vehicle assets remain owned, particularly those of the Scottish Ambulance Service, NHS National Services Scotland, NHS Tayside, NHS Fife, and NHS Borders. The current 5 year investment plan for vehicle assets, which is taken from NHS Boards' own investment plans, is circa £9m per annum. Note, however, that earlier analysis of age and condition suggests that current vehicle assets are in reasonable condition and age thus do not suggest a current backlog of investment need.

4.5 Investment required on medical equipment assets

In relation to its overall £940m value, during 2013/14 a total of over £66m was spent on medical equipment. This would theoretically result in complete replacement of all existing equipment within 14 years (most equipment tends to need replacing within 7-15 years). This is the second year that this investment benchmark analysis has been undertaken from NHS Boards' pro-forma return information, which has changed from a replacement cycle of 12 years to the currently reported 14 years. Further analysis of future trends in this indicator will be important to understand the full implications of medical equipment funding levels. Note though that rapid technological developments in some equipment, including high cost radiotherapy, imaging equipment (CT and MRI) and endoscopy equipment, which together account for approximately 35% of the total value of medical equipment, reduces the effective lifespan of this equipment to 7 to 10 years.

Implications of not replacing medical equipment within a reasonable period include:

• Outdated equipment does not take advantage of new innovations aimed at improving patient care.
• Lack of parts for maintenance grows as equipment ages beyond 7 years.
• A backlog of medical equipment replacement needs can result in a reactive replacement strategy that does not support standardisation or optimize replacement decisions.
• Medical equipment that is lower priority for replacement may extend its continued use and eventually create a build-up of backlog replacement need.

4.6 Investment required on IM&T assets

NHS Boards are reporting planned expenditure on IM&T projects at £96 million over the next 5 years. This is lower than the £130 million reported in last year's SAFR. However, further IM&T investment is incorporated into some of the major investment projects associated with the refurbishment and replacement of property assets.

This expenditure is part of the overall eHealth Finance Strategy which has an annual budget of circa £90 million per annum over the next 3 years. In addition, eHealth Directorate retained funds may be used to contribute to refresh activities in relation to infrastructure. The eHealth Finance Strategy assumes flat funding in relation to Infrastructure over the next 3 years, this means RPI and upward pressures from existing contracts must be contained within the existing allocation. In addition to this, as development from the Strategic funding moves into a stable state, these systems or services would be incorporated within the Application and/or Infrastructure portfolios. Funding for this needs to be absorbed within existing allocations. The chart that follows illustrates the financial landscape for eHealth.

In terms of the sufficiency of such investment, the annual investment in IM&T assets of £19m will meet the replacement value of these assets, currently estimated at £210 million, within circa 11 years. Careful management will be required to ensure that a build-up of infrastructure (network cabling, servers, etc.) backlog does not arise due to the increasing use of end user IM&T equipment, as well as the relatively short life of desktop and mobile equipment devices, which have the potential to outgrow the capacity of the infrastructure. This investment will also need to fund any additional investment in technology.

4.7 Summary of asset investment plans

The combined asset investment plans of circa £550 million per annum is shown in the chart below. Although presented as a single investment amount, in practice some of the capital requirement will be funded through revenue schemes such as NPD, hub and leasing arrangement.

Combined Future Asset Investment Requirements

In addition to the investment requirements identified above there is expected to be further investment required to implement the recommendations of the Soft FM Review, environmental improvement investments, implementation of the Zero Waste Plan and the Waste Regulations 2012.

4.8 Key messages

The analysis of future asset investment requirements described in this section of the report has identified a number of key messages for Boards in terms of developing their future PAMS:

1. NHS Boards should continue to focus their investment strategies towards reducing backlog maintenance of high and significant risk backlog.

2. Estate rationalisation leading to disposal of surplus properties has the potential to:

a. Reduce currently identified and future backlog
b. Lower future operational costs (property maintenance, energy, cleaning etc.)
c. Reduce future investment requirements for estate replacement

3. Estate rationalisation is a key tool for addressing backlog since it avoids increasing the base backlog cost by VAT, fees, contingencies etc. The alternative approach of direct investment in eradicating backlog is costly and unlikely to be affordable as a long term strategy. The Scottish Government have allocated £5 million to support the disposal of surplus assets.

4. 70% of annual recurring expenditure on assets is associated with the day to day operation and maintenance of the estate and the delivery of associated facilities services (£709 million per annum). Therefore, it is essential to focus on improving the performance on these services.

5. Estate replacement projects have the potential to bring about significant change to way in which the existing estate is configured and how it might continue to support the delivery of healthcare services. These opportunities for strategic change should be at the heart of each NHS Board's decision making process for estate replacement projects.

6. Investment plans should not ignore the requirements of the other assets, which need to be sufficient to ensure adequate replacement, but also for further investment in new technology that might introduce innovative solutions towards NHSScotland's 2020 Vision for quality healthcare provision, and potentially reduce reliance on continued investment in property replacement.

7. In addition to the investment in assets planned by individual Boards, there are also a number of national initiatives supported by the Scottish Government to invest in assets.