NHS Scotland assets and facilities 2016: annual report

2.0 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 2014/15 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 1.4.

2.1 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 (£m)
	2012/13 (£m)	2013/14 (£m)	2014/15 (£m)	Percentage Change 13/14 to 14/15
Property Maintenance (capital and revenue costs)	123.5	119.1	115.4	-3%
Cleaning	119.8	122.1	126.5	4%
PFI Facilities Management Costs	117.7	115.9	118.6	2%
Catering	84.9	85.6	87.2	2%
Energy	104.7	105.2	100.6	-4%
Rent	14.6	19.9	21.0	6%
Rates	50.9	43.8	48.8	11%
Portering	48.6	50.3	52.33	4%
Laundry only	32.1	32.2	24.4	-24%
Waste Disposal	11.8	11.8	11.8	0%
Total	708.7	706.1	706.6	0%
	Annual Change	-0.4%	0.1%

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 D.

Laundry costs are affected by changes to reporting requirements which no longer includes linen costs.

The largest cost contributors of property maintenance, cleaning, PFI FM costs, catering, and energy account for 78% of these costs, which together remain generally unchanged between 2013/14 and 2014/15, which is also mirrored in the overall costs.

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.

	2013/14	2014/15	Percentage Change 2013/14 to 2014/15
Number of hospitals	220	216	-1.8%
Building Area used for measuring cleaning costs (million sq.m)	2.88	2.89	0.3%
Consumer weeks (millions) (in-patient activity)	0.98	1.00	2.3%
Annual Property Asset and Facilities Services Costs (£millions)	706.1	706.6	0.1%

The table shows that the relatively unchanged overall cost is at a time when reported cleaning floor areas and inpatient activity (consumer week) have increased slightly.

2.2 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	£m	% of Total	No. of Vehicles	Average per Vehicle
Insurance & accident costs (net cost)	6.00	11.5%	9,780	£614
Fuel costs	11.40	21.8%	9,780	£1,163
Maintenance & servicing costs -	8.01	15.4%	1,938	£4,135
owned vehicles
Leased vehicle costs	6.53	12.6%	2,264	£2,886
(including maintenance)
Hired vehicle costs	1.15	2.2%	222	£5,178
Staff car scheme lease costs	19.00	36.5%	5,356	£3,547
(including maintenance & mileage claims)
Staff contribution towards private use	(9.81)	-	5,356	(£1,831)
Total Net Costs 2016	42.26	100%	9,780	£4,321
Total Net Cost 2015	42.55			£4,191

Note: excludes 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 £24.5m through expenses claims.

The annual change in total expenditure on vehicle assets includes lower staff car scheme costs as the number of cars has significantly reduced; lower fuel costs as the cost of fuel has significantly reduced; but higher insurance, maintenance and lease costs.

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.

2.3 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 latter 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	2015 Expenditure (£m)	2016 Expenditure (£m)	% change
Externally sourced maintenance expenditure:	22.22	24.58	11%
Imaging maintenance	11.67	13.44	15%
Radiotherapy maintenance	1.16	1.15	-1%
In-house management / maintenance of medical equipment	12.54	17.70	41%
Annual payments & lease costs for managed equipment services (excluding Laboratory managed services)	4.26	3.79	-11%
All other revenue based expenditure on medical equipment	7.79	7.97	2%
TOTAL ANNUAL EXPENDITURE ON MEDICAL EQUIPMENT:	59.64	68.63	15%

Costs exclude VAT

The increase in 'In-house management / maintenance of medical equipment' is as a result of more accurate figures supplied this year from NHS Lothian and NHS Fife, plus a trend towards more maintenance being carried out in-house rather than externally sourced.

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.

2.4 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 £1,031 million is a small increase of less than 1% on the expenditure reported in the 2015 SAFR.

NHSScotland's Annual Revenue Expenditure on Assets and Facilities Services (Total Expenditure £1,031 million)

Notes:
1) Excludes 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.