The total annual budget for a hospital trust will vary greatly depending on the size of the organisation. About 70% of a trust’s expenditure will be taken up in staff costs.
Financial management
The total annual
budget for a hospital trust will vary greatly depending on the size of the
organisation. About 70% of a trust’s expenditure will be taken up in staff
costs. Medicines expenditure will account for about 15–50% of the remaining
non-staff expenditure depending upon the nature of the services provided (for
example, the provision of human immunodeficiency virus services can increase
the proportion of medicine costs). Not surprisingly, managing and controlling
medicines expenditure is often given high priority by hospital management
teams; Chapter 11 addresses this issue.
Trust managers will
expect the chief pharmacist to take responsibility for all aspects of financial
management relating to pharmacy services and the organisation’s medicines
budget. This requires the ability to obtain sufficient resources to maintain
and develop services and to respond to the introduction of new services arising
from changing trust priorities. It means working with the pharmacy team to
ensure that pharmacy services are as efficient as they can be, that they
deliver value for money and that the contributions made are recognised at trust
level. With the increasing emphasis on efficiency savings in the NHS, budgetary
management cannot be solely the responsibility of the chief pharmacist, and
specialist pharmacists in particular will be essential to the delivery of
savings in drugs budgets.
Budgets are set on
an annual basis, although some changes may be incorp-orated during the
financial year, particularly where changes to staffing levels have been agreed
or cost improvements have been delivered. The chief pharmacist, as the
budget-holder, will be expected to ensure that expenditure does not exceed the
agreed budget. Income and expenditure used for pay and non-pay costs during the
year are described in financial terms as revenue. Capital is used for the
construction of new or refurbished facilities or the purchase of new equipment.
Availability of capital depends on the organisa-tion delivering a surplus –
income exceeding costs – unless specific funds are made available for the NHS
or from charities.
In many trusts, the
chief pharmacist will be expected to be involved in the contracting process
that occurs between the commissioner (primary care trusts at the time of
writing, but soon to be general practitioner consortia) and the hospital (the
provider) to ensure that sufficient money (income) is gained to cover the full
cost of providing services (expenditure). The chief pharmacist can, with the
support of his or her team of specialists, bring valuable expertise to the
contracting negotiations in relation to the predicted medicines expenditure for
the year ahead.
Within the
organisation, an NHS hospital trust will normally devolve the budget to the
individual clinical and non-clinical directorates or div-isions.
Directorate/divisional managers will have responsibility for manag-ing their
budgets and for developing their own business plans and constructing budgets
with their finance advisers to cover their services. The crucial role of the
chief pharmacist, supported by the rest of the phar-macy management team, is to
act as an advocate for the pharmacy service and ensure that sufficient
resources are available to maintain and develop services in line with the
overall direction and objectives of the directorates and the trust. This will
invariably require the application of considerable negotiating skills to secure
an appropriate share of limited resources. As new hospital services are
identified and developed, the chief pharmacist will need to ensure that their
impact on the pharmacy service has been properly assessed and, where
appropriate, additional resources are allo-cated. This requires the chief
pharmacist to be well connected and informed at a corporate level to avoid
overlooking pharmacy service costs.
Within the current
financial climate, with the quality–productivity chal-lenge, chief pharmacists
are expected, with their teams, to think differently about the way services are
delivered so that pharmacy services deliver more in terms of quality and
breadth of service for less expenditure. Although a proactive approach to
service development may not always be successful, a positive outcome is more
likely to be achieved when pharmacy managers recognise that strategic planning
aligned to the trust objectives is essential. Requesting realistic funding for
new services or managing to deliver a change in service provision without the
need for additional funding will also enhance the pharmacy team’s reputation
and increase success in these negotiations.
Staffing levels vary
greatly between trusts. The staffing establishment will comprise professional,
technical, ancillary, administrative and clerical staff, as well as pharmacist
and technician trainees. As often staff work on a part-time basis, the number
of people employed, known as the head count, will generally exceed the number
of established whole-time-equivalent posts (WTEs). A ratio of 1:1:1 (pharmacist
: technicians : others) has been suggested as an appropriate balance.
The final staffing
budget will be calculated on the agreed staffing establish-ment for the
department, measured as WTEs. The budget will reflect the grades, salaries and
allowances, such as emergency duty commitments, for each staff member and will
also include the employer’s overhead costs, such as national insurance and
superannuation (pension) payments. A hospital pharmacy with a staff of 160 WTEs
will have an annual budget of about £4.5 million.
When managers
experience difficulty in filling vacant posts on a long-term permanent basis
they may rely on the availability of temporary staff supplied by locum
agencies. Such staff are more expensive than permanent staff and present a
particular challenge for budgetary management and for maintaining the morale of
the permanent staff members. The financial position in the NHS currently means
that in many trusts agency staff are not employed and existing staff resources
have to cover services or discussions occur about service reductions.
As part of a trust’s
annual business-planning process, pharmacy managers, in collaboration with
their directorate pharmacists, should be involved in the estimation of
medicines budgets for the forthcoming year. The primary purpose of this
exercise will be to set budgets that have been adjusted for the impact of a
variety of critical factors and influences. These may include anticipated
changes in clinical activity and case mix, the potential impact of new –
invariably more expensive – recently licensed drugs, changes in drug treatment
preferences, savings from negotiated purchasing contracts and, conversely,
increases in the acquisition costs of medicines. Although it would be extremely
difficult to achieve total accuracy in the budget-setting process, it is
important to achieve a level of confidence in the budgets so that a greater
commitment to effective expenditure control can be maintained during the
financial year. This is also important for the ex-tariff medicines (see Chapter
1 for an explanation of ex-tariff medicines).
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