Introduction
The following information sets out the key figures for Evelina London and St George’s for the Principal Treatment Centre move, as described in their proposals, and key information relating to financial aspects of the service reconfiguration process.
- The first table sets out a summary of key figures and other information for Evelina London and St George’s
- The second section sets out key information relating to financial aspects of the reconfiguration process
| Table 1: summary of key figures and other information | Evelina London Children’s Hospital £000s | St George’s University Hospitals NHS Foundation Trust £000s |
|---|---|---|
| Gross capital investment cost of which: | 44,000 | 31,000 |
| – national capital | 20,000 | 20,000 |
| – charitable donations | 10,000 | – |
| – Integrated Care System capital funding | 14,000 | 11,000 |
| Net capital investment cost to the NHS | 34,000 | 31,000 |
| Are capital costs affordable? | Yes | Yes |
| Have all funders confirmed their funding? | Yes | Yes |
| Are letters of support, required in NHSE guidance, agreed with Commissioners | Yes | Yes |
| Area – square metres | 4,708m2 | 4,210m2 |
| Asset Lifecycle – the standard lifetime assumption for the refurbished building before either replacement or additional refurbishment | 30 years | 30 years |
| PUBSEC Index Baseline [1] | As of 30th September 2022 | As of December 31st, 2022 |
| Royal Institute of British Architects (RIBA) stage [2] | Stage 0-1 | Stage 1 |
| Fees as % of total capital costs | 15% | 15% |
| Contingency as % of total cost | 10% | 10% |
| Inflation as % of total cost | 12.7% | 10.2% |
| Optimism bias as % of direct works costs. Optimism Bias is a standard adjustment to the estimates of a project’s costs & benefits. It is done to compensate for the tendency of business cases to be overly optimistic. It is therefore a type of contingency fund. | 23% | 21% |
| Construction start date | November 2024 | June 2024 |
| Go live date | May 2026 | May 2026 |
| Have revenue costs been worked up clearly and consistently for pay and non-pay? | Yes | Yes |
| Have income assumptions been worked up clearly and consistently? | Yes | Yes |
| Are the revenue costs affordable for each Trust assuming short term support for the additional capital charges? | Yes | Yes |
| Is transitional capital charge funding required? Capital charges reflect the revenue costs of fixed assets and equipment to organisations which are: wearing out of assets – depreciation; and money tied up in assets and not available for use elsewhere – cost of capital. | Yes | Yes |
[1] The Tender Price Index of Public Sector Building Non-Housing (PUBSEC) measures the movement of prices in tenders for building contracts in the public sector
[2] The RIBA Plan of Work organises the process of briefing, designing, constructing and operating building projects into eight stages. View the RIBA Plan of Work eight stages here.
Key financial information on the reconfiguration process
What is the role and place of Finance in the option evaluation?
NHS England has laid out the process to follow for service changes in ‘Planning, Assuring and Delivering Service Change for Patients 2018’.
The key financial test is that any proposal is affordable in capital and revenue terms ahead of public consultation. The financial test is therefore a hurdle criterion.
This is the approach NHS England have used to evaluate the financial content of proposals. This approach was agreed by the Programme Board in March 2022.
How has financial information been used?
Financial information was submitted for the capital or build/fit out costs and the ongoing revenue costs for each proposal. Submissions were assured by the regional finance team and the London Estates Delivery team, at the level appropriate for this stage in the process. Both Trusts were invited to submit revised/refreshed financial content for their proposals prior to the finalisation of the pre-consultation business case.
Why were financial considerations not part of the option scoring methodology?
Introducing finance as a scoring domain could mean that financial scores potentially become the deciding factor in choosing which option would offer the best children’s cancer centre for the future.
NHS England guidance says that proposals are required to show that the capital and revenue costs included in submissions are affordable to the relevant Trust – this is the approach NHS England have used to evaluate the financial content of proposals. This approach was agreed by the Programme Board in March 2022.
How are the capital costs outlined in the two proposals being funded?
The St. George’s proposal is funded by the £20m national capital contribution with the balance of £11m from capital that the South West London Integrated Care System has responsibility for.
The Evelina London proposal is funded by the £20m national capital contribution, £10m charitable funds from the hospital charity, with the balance of £14m from capital that the South East London Integrated Care System has responsibility for. [3]
[3] Integrated Care Systems are partnerships of organisations that come together to plan and deliver joined up health and care services, and to improve the lives of people who live and work in their area.
Why are the capital costs different for each option?
Both trusts used professional cost advisors to develop their proposals. There are a number of reasons why costs differ including, location, available space, the technical detail of the specific refurbishments required, levels of new equipment required, and experience drawn from previous approaches taken by each Trust in delivering infrastructure and estates projects.
What about ‘other costs’ like transition costs and stranded costs that may be relevant?
Transition costs are short-term costs associated with the service change. This may include the costs of staff time that is needed to help ensure that the service change is managed smoothly and safely.
Stranded costs are costs that an organisation may continue to incur after the service change happens, even if it is not delivering it anymore. Typically, an organisation may need to redesign some aspects of their operating model to reduce and eliminate these.
When the service moves away from The Royal Marsden there may be some stranded costs that the organisation incurs. This would be the same for St George’s in the scenario that the services move to Evelina London.
NHS England will consider funding stranded costs for The Royal Marsden (and St George’s in the event the Trust does not become the future Principal Treatment Centre). These costs do not form part of the revenue hurdle assessment because they are expected to have been absorbed by the ‘steady state’ year and are non-recurrent (that means they aren’t ongoing).
Guy’s and St Thomas’ NHS Foundation Trust of which Evelina London is part and St George’s University Hospitals NHS Foundation Trust have submitted requests for transitional revenue support up to ‘steady state’ or the first full year of operation. NHS England has made clear that it would consider reasonable submissions, subject to a maximum three-year taper to zero. The process and detail for providing transitional revenue support will be discussed between NHS England and the Trust who is going to become the future Principal Treatment Centre once a decision has been made.
Further work will be needed by the Trust(s) after a decision has been made to develop an accurate and reasonable estimate of these costs. NHS England will support this work.