NHSScotland assets and facilities 2015: annual report

3.0 The annual cost of Assets and Facilities Services

The revenue and lifecycle costs associated with asset ownership and use represent a considerable proportion of NHSScotland budgets. This section of the report provides a summary of the annual cost (based on 2013/14 Cost Book data) of asset ownership and facilities management services. Whilst this section provides some comparative information on annual changes, more detailed information on performance trends was described earlier in Section 2.4.

3.1 Property Assets and Facilities Services - Annual Costs

There are significant annual revenue costs that are directly associated with property asset ownership including:

• Property Maintenance - regular day to day maintenance including revenue expenditure on backlog but excluding major capital expenditure on upgrading/refurbishment and backlog works)
• Energy
• PFI Facilities Management Costs (primarily Hard FM)
• Rent and Rates
• Cleaning

There are also a range of facilities management services costs that are closely associated with property asset ownership including:

• Catering
• Portering
• Laundry and linen
• Waste disposal

The annual property and facilities services costs for the last three years, and which are within the scope of the SAFR, are shown in the table that follows (excludes Special Boards and the non-hospital estate).

	Annual Property Asset and Facilities Services Expenditure (£)
	2011/12	2012/13	2013/14	Percentage Change 12/13 to 13/14
Property Maintenance (capital and revenue costs)	117,679,791	123,457,925	119,102,656	-4%
Cleaning	117,425,095	119,750,871	122,115,049	2%
PFI Facilities Management Costs	106,949,026	117,745,007	115,931,448	-2%
Catering	81,039,194	84,888,978	85,620,045	1%
Energy	89,688,057	104,689,012	105,294,975	1%
Rent	9,028,816	14,649,596	19,916,172	36%
Rates	46,071,140	50,919,886	43,846,693	-14%
Portering	47,532,728	48,637,007	50,262,304	3%
Laundry and linen	33,566,916	32,120,687	32,196,777	0%
Waste Disposal	10,779,203	11,829,875	11,837,003	0%
Total	659,759,966	708,688,844	706,123,122	-0.4%
	Annual Change	7.4%	-0.4%

Note: The above table excludes depreciation on property asset; costs associated with Community and Family Health Services, and energy costs exclude costs associated with environmental taxes and levies e.g. EU ETS Payments. Further details relating to energy costs are provided in Annex C.

There has been a reduction in overall expenditure from last year of 0.4%, with only a slight increase in expenditure for cleaning, catering, energy, rent and portering.

Previous work on SAFR has identified that these property assets and facilities services costs are primarily (but not exclusively) driven by building size (volume/area) and patient activity (as measured by consumer weeks). The change in these primary cost drivers, and the number of hospitals, is shown in the table that follows.

	2012/13	2013/14	Percentage Change 2012/13 to 2013/14
Number of hospitals	228	220	-3.5%
Building Area used for measuring cleaning costs (sq.m)	2,974,584	2,882,805	-3.1%
Consumer weeks	1,016,582	981,595	-3.4%
Annual Property Asset and Facilities Services Costs	708,688,844	706,123,122	-0.4%

The table shows that small decrease in expenditure on assets and facilities has been at a time when the property assets has been decreasing in terms of both the number of hospitals, the hospital building size (area) and reduced inpatient activity (consumer weeks). However, it should be recognised that whilst inpatient activity (as measured by consumer weeks) has reduced there has been corresponding increases in the number of patients treated as outpatients or on a day case basis.

3.2 Vehicles - Annual Costs

NHSScotland's estimated annual expenditure on its vehicles assets, as indicated through NHS Board information returns, is shown in the table below.

Annual Expenditure on Vehicle Assets
Description	£	% of Total	No. of Vehicles	Average per Vehicle
Insurance & accident costs (net cost)	£5.6m	10.64%	10,151	£555
Fuel costs	£13.2m	24.83%	10,151	£1,296
Maintenance & servicing costs -	£7.88m	14.86%	1,932	£4,078
owned vehicles
Leased vehicle costs	£5.48m	10.34%	2,516	£2,179
(including maintenance)
Hired vehicle costs	£1.14m	2.15%	155	£7,350
Staff car scheme lease costs	£19.70m	37.18%	5,548	£3,552
(including maintenance & mileage claims)
Staff contribution towards private use	-£10.45m	-	5,548	(£1,884)
Total Net Costs 2015	£42.55m	100%	10,151	£4,191
Total Net Costs 2014	£36.44			£3,341

Note: excludes capital charges and depreciation on owned fleet.

In addition to the above, many NHSScotland staff use their private vehicles for official business and claim fuel and running costs of circa £26m through expenses claims.

The annual change in total expenditure on vehicle assets includes lower insurance and staff car scheme costs but higher maintenance costs (mainly due to better information returned on this cost indicator).

The Transport & Fleet Management Review is continuing to look at ways in which improvements can be made to the efficiency and effectiveness of this fleet aimed at reducing these operational costs (see Annex G for further details).

3.3 Medical Equipment - Annual Costs

Medical equipment use requires operational (revenue) costs for associated consumables and accessories, for routine scheduled maintenance and for breakdown maintenance. The survey explored these operational costs that, together with the acquisition and installation costs, form the total cost of ownership ( COO) of the equipment. Consumable and accessory costs are typically charged to individual departments and no central records will cover all these costs. In most cases maintenance costs (scheduled and unscheduled) are easier to identify. Maintenance is provided through a combination of in-house staff and external service suppliers, the later often through service contracts. Efforts are being made through robust negotiations to fix maintenance costs, in some cases for up to 10 years, to reduce the total cost of ownership of medical devices. The annual maintenance expenditures reported by Boards is shown in the table that follows.

Description	2014 Expenditure (£)	2015 Expenditure (£)	% of Total
Maintenance expenditure (excluding cost of in-house teams) on:
Renal Dialysis Equipment	529,932	452,760	1%
Cardiac Defibrillators	195,712	226,065	0.4%
Flexible Endoscopes	3,607,562	4,935,566	8%
Infusion Devices	327,359	602,465	1%
Radiotherapy Equipment	1,536,532	1,155,164	2%
Imaging Equipment	12,382,153	11,669,627	20%
All other Medical Equipment	18,159,652	16,008,418	27%
Lease costs (including associated maintenance etc)	757,835	949,059	2%
Annual payments (including maintenance etc) for managed equipment services and private finance arrangements (excluding Laboratory managed services)	2,991,420	3,312,914	6%
Cost of in-house teams responsible for management of medical equipment	9,517,198	12,537,847	21%
All other revenue based expenditure on medical equipment (excluding consumables & accessories)	5,446,755	7,792,235	13%
TOTAL ANNUAL EXPENDITURE ON MEDICAL EQUIPMENT:	55,452,110	59,642,121	100%

Annual changes in the above costs include a changing operational need for maintenance, better reporting of costs, and the impact on annual inflation and salary increases.

As with property assets, there is a need to balance investment between ongoing annual maintenance of medical equipment, investment in its lifecycle replacement and investment in new innovative developments that advance the cost effectiveness of health care, including the ability to provide health care in the community. These advances, some facilitated by integration with information and communication technology ( ICT), offer patient benefits including improved patient care, improved quality of life for patients, care in the community, and for imaging equipment clearer sharper images with reduced radiation doses. Staff benefit from the improved equipment functionality, improved reliability, and ease of use as manufacturers respond to standards on ergonomics. As equipment life is relatively short (often less than 15 years) the level of maintenance needs to be sufficient to ensure its continued safety, availability and effectiveness within that period whilst accepting that other considerations, such as technical and clinical obsolescence, can influence the need to replace equipment earlier than planned.

3.4 IM&T - Annual Costs

The IM&T survey covering the base date of 2011/12 remains the most up to date national information available on the annual cost of IM&T assets. This identified that the overall level of expenditure by NHSScotland on IM&T in 2011/12 was £236.5m. Of this total, £213m was incurred on expenditure items of a revenue nature, with £23.5m incurred on capital expenditure. An analysis of the revenue expenditure is shown in the chart below.

The total revenue expenditure of £213m is split as follows:

• £57.5m (27%) of non-recurring expenditure by NHS Boards to support national systems and deliver eHealth strategic priorities.
• £91.5m (43%) of revenue expenditure by NHS Boards.
• £53m (25%) of revenue expenditure by Special Health Boards.
• £11m (5%) expenditure by the Scottish Government eHealth Division.

3.5 Summary of Total Annual Asset and Facilities Costs

The chart below provides an analysis of the combined total asset and facilities annual expenditure that has been described earlier. The combined expenditure of £1.022 billion is a small increase of less than 1% on the expenditure reported in the 2014 SAFR.

NHSScotland's Annual Revenue Expenditure on Assets and Facilities Services (Total Expenditure £1,022 million)

Notes: 1) Excludes capital charges and depreciation costs associated with asset ownership

2) Excludes any annual expenditure on lifecycle replacement and capital expenditure on backlog maintenance

3) Property & Facilities Service Expenditure is for the Hospital Estate only.

It should be noted that the above annual expenditure on assets excludes capital expenditure on:

• Replacement of existing assets - both major capital schemes (Board capital and NPD) and smaller schemes procured through hubco.
• Replacement of major existing assets - medical equipment, vehicles and IM&T - procured through revenue or Board capital.
• Major lifecycle maintenance/backlog such as boiler and major infrastructure and backlog replacement - procured through Board capital.