Description
The new Finance Operating Model for Health in Ireland will support far reaching and fundamental change in financial management practice and will be an important enabler of wider Systems Reform.
CONFIDENTIAL – between PA and The Health Service Executive
DEFINING FINANCIAL
MANAGEMENT
A Finance Operating Model for Health
in Ireland
30 August 2013
FINAL REPORT
CONFIDENTIAL – between PA and The Health Service Executive
PA Regional Office:
PA Consulting Group
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Tel: +353 1 6684346
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Prepared by: PA Consulting Version no: 1.0
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The new Finance Operating Model for Health in Ireland will
support far reaching and fundamental change in financial
management practice and will be an important enabler of
wider Systems Reform. Underpinned by a single
integrated financial management system and a mandated
financial management framework, these changes will
ensure financial stability within a reformed health system
and will drive a culture of collective responsibility and cost
consciousness.
This report recommends a new Operating Model for
Finance and seeks approval to progress with Phase 2 of
the Finance Reform programme as outlined in the
Implementation Strategy with immediate effect.
The future sustainability of healthcare funding
remains a key Government priority
The economic crisis has had a profound impact on public services in Ireland.
The Government’s efforts to manage public expenditure in line with
commitments made to the Troika has seen budget reductions in Health of
€3.3bn (22%) since 2008.
Staffing levels have reduced by over 11,268 WTEs since the peak
employment levels in September 2007. Health services continue to
experience very significant budgetary challenges alongside increased
demands for services.
Budget overspends during 2012 prompted external reviews into financial
management practices in Health, and managing Health finances became a
priority for the Troika in ensuring the future economic stability of the country.
The Programme for Government will drive significant changes to the way
health services are managed and delivered to ensure:
? A public health service that is leaner, more efficient and better integrated
to deliver maximum value for money and respond to public needs; and
? Continuity of service delivery in the context of significantly reduced staff
numbers.
In November 2012, the Minister for Health published Future Health: A
Strategic Framework for Reform of the Health Service 2012 – 2015),
outlining the main healthcare reforms that will be introduced in the coming
years as key building blocks for the introduction of Universal Health
Insurance in 2016.
Future Health seeks to support innovative models of care delivery and in
particular integrated care pathways. All this must be achieved under the
most stringent fiscal constraints experienced for decades and cognisant of
health trends and drivers of change such as:
EXECUTIVE SUMMARY
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CONFIDENTIAL – between PA and The Health Service Executive
? Demographic change;
? New medical technologies, health informatics and telemedicine;
? Rising expectations and demands; and
? Spiralling costs of healthcare provision.
? Health services in Ireland face the dual challenge of reducing costs whilst
improving outcomes for patients. In these circumstances the need for
strong, effective financial management is of paramount importance.
There is a clear consensus for the need for change
The review of current financial management arrangements secured
consensus amongst the finance community that the current operating model
is no longer fit for purpose. There are three distinct drivers for change in the
financial management practices within the health system in Ireland, and
these are considered below:
The current operating model is no longer fit for purpose
Reports by Ogden and PA during 2012 identified significant weaknesses in
financial management practices.
We have worked closely with the finance community to understand current
ways of working and have found many examples of good practice, achieved
in spite of variations in processes, multiple financial systems and limited
engagement with the voluntary sector.
However it was clear that current practice was not fit for purpose and is
characterised by:
? Inconsistency in the level and standards of service provided to different
customer groups across the system;
? The extent of financial management activity being supported by teams
with no direct accountability or responsibility to the CFO;
? The extent of process variation, inconsistent data definitions and multiple
finance systems in place inhibit the ability of staff involved in decision
support and compliance to make best use of their skills and expertise;
? Effectiveness of decision support being compromised by time spent
validating and manipulating data to meet information requirements of
customers;
? A lack of shared ownership of transaction processes – finance, HR and
procurement results in duplication and inconsistency in processes and a
lack of integration;
? Significant under-investment in technology which has compromised the
ability of finance to improve current working practices;
? Weak accountability for actions and recognition that financial
management is a corporate responsibility undermines the controlling role
of finance; and
? A lack of investment in training and development of both finance staff
and budget holders to ensure that they discharge their financial
management responsibilities effectively.
The current financial management framework does not
support the CFO’s responsibilities and accountabilities
The Health Service Executive (Governance) Act, 2013 strengthens the
accountability arrangements between the HSE and the Government. The
role of CFO was introduced to support these new accountability
arrangements.
The CFO’s appointment sends a clear statement of intent to stakeholders
that steps will be taken to improve confidence in financial management
practices and to achieve greater financial control.
The CFO has accountability for financial management across the entire
health system. To discharge that accountability the CFO must ensure that
the financial management framework enables him to deliver against all four
facets of his role:
? Stewardship and accountability: ensuring the compliance framework is in
place to provide a true and fair view, that builds trust in the financial
information provided;
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? Financial Management: ensuring practices across the system inform
decision making, promote probity and value for money and a culture of
cost consciousness and continuous improvement;
? Corporate Leadership: as a Board member providing strategic direction,
effective corporate governance and building strong relationships; and
? Professional Leadership: driving professional standards, leading the
profession and building capability across the system.
? The current operating model does not provide the CFO with the
adequate tools to discharge this responsibility.
The fundamental changes in healthcare heralded by Future
Health bring new requirements which current practices
cannot support
The long term changes in Ireland’s health system, as described in Future
Health have significant implications for finance.
The introduction of Money Follows the Patient (MFTP) and ultimately
Universal Health Insurance (UHI) will fundamentally change the financing
system requiring:
? The creation of new organisational entities to support commissioning,
tariff setting, pricing & payment and service regulation;
? A fundamental change in the relationship between the Department of
Health, these new organisational entities and Health and Social Care
Providers (HSCPs);
? A change in culture and behaviour amongst HSCPs particularly in
financial management, so that they understand the cost of service
provision by procedure, and have the ability to operate effectively in a
commissioning environment which defines services to be provided and
the payment streams for these services, and
? The development of a new relationship between the Insurance sector in
Ireland and the Health system together with a supporting infrastructure to
underpin the mechanics of UHI.
Whilst finance has traditionally found innovative solutions to new
requirements, the consensus reached is that the current operating model
cannot effectively respond to these changes. The success of health reform
is fundamentally dependent on having a transformed approach to Financial
Management.
The scope and scale of change required presents
a significant challenge to the system
It is important to recognise the flexibility, professionalism and commitment of
the finance team in the way that they work within current structural and
systems constraints to support financial management across the system.
Phase 1 of the Finance Reform Programme has made a significant impact in
tackling specific challenges in service planning, budgeting and cost-
containment, and it should also be recognised that this added to the
workload of an already stretched finance team. There is tangible evidence of
change fatigue in the system which will potentially impact on the pace of
change.
The challenge facing the HSE is how best transform financial management
during a period of unprecedented change across the healthcare system.
There is a need to build on what has been achieved in recent months and to
deliver an approach to financial management that secures medium term
stability and cost containment while allowing sufficient flexibility to support
the reforms under the vision for Future Health.
Critical to success will be:
? Demonstrating intent and ability to deliver;
? Securing timely approvals for any investment;
? Addressing workforce issues effectively; and
? Resourcing the programme properly using key finance staff and external
support where required.
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A new operating model for Finance will drive real
change over an extended period
This report defines a new Finance Operating model for Health in Ireland,
which addresses the challenges of current financial management practice,
and is capable of meeting the future needs of a dynamic and complex health
environment.
This will fundamentally transform finance from being a reactive, disjointed,
reporting function into a proactive, coherent decision support capability,
adding value at all levels of the business at a significantly reduced cost.
The model builds on leading practice principles to ensure the CFO’s
responsibilities and accountabilities for financial management are delivered,
and the desired changes in behaviours amongst both finance staff and
budget holders drive the improvements in financial management practices
required. The CFO will:
? Define the financial management framework to be followed ;
? Provide trusted and timely information to support decision making, in a
standard and consistent way
? Inform strategic and operational decision making through trusted
professional advice, insightful analysis and decision support; and
? Ensure expected standards are maintained through effective compliance
and performance management.
The model is underpinned by a commitment to develop the financial
management capability of both finance staff and budget holders to build a
cost-consciousness culture and change behaviours across the system.
A service delivery model reflecting leading practice
Finance will provide a consistent and appropriate level of service to all users
reflecting user requirements and focused on improving the quality of
financial management and enabling informed decision making.
This will be achieved through a service delivery model comprising three
distinct components as illustrated in the figure below:
? Operations Excellence: the ‘finance engine room’ which will ensure that
the infrastructure is in place to deliver financial reporting and transaction
processing effectively and efficiently;
? Finance Specialists: deep technical skills and expertise providing a
single point of contact for expert advice; and
? Business Partners: supporting financial management decision making
and promoting a culture of financial responsibility across the system by
working closely with the business at a strategic, national and operational
level.
Process, Governance and Controls to demonstrate
effective financial management practices
The CFO will define the financial management framework which is
mandated across the health system. This will define the process,
governance and controls required to demonstrate effective financial
management practice
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In practice that means:
? Processes are standardised, simplified and automated wherever possible
? Clear line of sight from a national consolidated position to a functional
business unit level is possible for all areas of expenditure
? Controls and rules are embedded within systems and guidance on their
application is available in a user friendly format online
? Governance and controls are mandated
? The CFO owns all end to end financial management processes
Information systems providing trusted management information
We recognise that technology is a key enabler of change and the successful
implementation of the new model is dependent on technology.
In practice that means:
? A single financial management system supporting HR, Procurement and
Finance processes will be deployed across the health system
? A national system to support patient level costing and tariff pricing
? Information and data governance to be owned by CFO
? A single version of the truth
? Trust in data
? Information to be collected once and used many times with financial
reporting and data analytics being delivered in a standardised, consistent
way to all users through Operations Excellence
A commitment has been made to introduce new financial systems for Health
within the Memorandum of Understanding between Government and the
Troika. Our plan to implement a new operating model for Finance provides
the means to deliver against this commitment.
Developing the Skills and Capabilities of all our people
The necessary changes in financial management practice rely upon
changes in behaviours from those involved across the system.
There is a requirement to invest significantly in building skills and
capabilities to support these changes.
In practice this means:
? Skills and capabilities mandated for key finance roles
? Continued Professional Development (CPD) compulsory for all finance
professionals
? CFO “head of profession” to improve standards and quality of financial
advice
? Learning and development for both finance professionals and non-
financial managers to be recommended and supported by CFO.
The model will be supported by a high level organisational structure as
follows:
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An incremental approach to change
The future operating model for Finance is only achievable if the following
components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and facilitating
effective self-service principles;
? Trusted financial management information which supports effective
decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance management
arrangements which reward good practices and provide sanction where
appropriate
The Finance Reform Programme will deliver these components over time,
but is a need to change the structures and operating model for Finance to
support the system during this transition period. This will support the delivery
of the Finance Reform programme whilst ensuring that systems of financial
control remain robust and effective during transition.
This is particularly important given:
? Many commissioned reports, including the C & AG Audit show that the
current financial systems are not fit for purpose;
? The recent establishment of ‘National Directors’ and the immediate
necessity to prepare financial systems to support their requirements; and
? The overall transition, in the next few months, from the current reporting
structures and the need for continuity of financial reporting through this
change, while ensuring financial integrity.
The diagram below illustrates the implementation strategy.
Step 1: Interim Structure
An interim structure will be introduced from 1 October 2013 for a period of
6-9 months. This will enable the CFO signal to the system that changes are
underway, and will allow the Finance Specialist and Operational Excellence
functions to be established. It will also support the consolidation of regional
finance operations into two units as an initial step towards Business
Partnering. The move to Step 2 can take place when the following
conditions are in place:
? ISA review outcome is known;
? Interim BI reporting solution in place;
? New system requirements defined; and
? The future role of Shared Services is confirmed.
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Step 2 – Transitional Operating Model
The Transitional Operating Model is designed to support the implementation
of the key change initiatives required to deliver the new Operating model
over time whilst continuing to support business as usual.
The Business Partner model will be introduced, and decision support
services to support commissioning and performance management will be
developed; and the implementation of financial management arrangements
within HSCPs supported.
The transitional operating model will be supported by the following high level
organisation structure:
These are key leadership roles within Finance and those in these posts will
have clear responsibilities for both service delivery and reform. They will
have a clear change management role, and will need supported and
developed to deliver that role effectively.
The Implementation Challenge
The scope and scale of the implementation challenge should not be
underestimated, and it is important to recognise that the Future Health
milestones will drive the pace of change.
Our work has secured significant consensus amongst the finance
community both of the need to change, and that the proposed model is the
right one to deliver the changes in financial management practices sought.
We have secured commitment and buy-in to make these changes a reality.
A quarterly milestone plan to support the next twelve months has been
developed as part of a three year change programme.
The plan identifies the need for significant and positive action in the
immediate months ahead and the success of the overall programme will
likely be defined by these actions.
Key activities include:
? Initiating Phase 2 of the Finance Reform Programme and mobilising the
delivery teams;
? Developing the business case for managed service to provide a single
integrated financial management system;
? Designing common chart of accounts, data standards and defining
system requirements;
? Developing interim BI reporting;
? The design of transitional and final organisation structures, roles and
person specifications; and
? Initiating procurement of managed service to provide a single integrated
financial management system.
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EXECUTIVE SUMMARY 3
The future sustainability of healthcare funding remains a key
Government priority 3
There is a clear consensus for the need for change 4
The scope and scale of change required presents a significant
challenge to the system 5
A new operating model for Finance will drive real change over an
extended period 6
An incremental approach to change 8
The Implementation Challenge 9
1 INTRODUCTION 14
1.1 Background and context 14
1.2 The Finance Reform Programme 14
1.3 How an operating model will support the scope and scale of
change required 15
1.4 Our Approach 16
1.5 Structure of the report 16
2 THE CURRENT SHAPE OF FINANCE 18
2.1 The Current Finance Operating Model 18
2.2 Information and technology 24
2.3 Inconsistency in support levels and standards 27
2.4 The provider landscape 27
2.5 The cost of finance 28
2.6 Strengths to build on and areas for development 32
3 HOW FINANCE NEEDS TO CHANGE 33
3.1 Drivers of Change 33
3.2 How Finance functions in other organisations are transforming 46
3.3 Requirements for change across the finance operating model
for health in Ireland 51
4 OPTIONS APPRAISAL 54
4.1 Our approach to options appraisal 54
4.2 Defining the Financial Management Framework 54
4.3 Delivering effective transaction processing 55
4.4 Addressing line management and accountability in Business
Partnering 56
4.5 Conclusion and recommended way forward 57
5 NEW FINANCE OPERATING MODEL FOR HEALTH IN
IRELAND 58
5.1 Purpose 58
5.2 Vision and Design Principles 58
5.3 A new Finance operating model 59
CONTENTS
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6 IMPLEMENTATION STRATEGY 69
6.1 Essential components of the new operating model 69
6.2 An incremental approach to change 70
6.3 Step 1: An interim organisational structure 70
6.4 Step 2: A transitional operating model 70
6.5 Implementation success factors 76
6.6 Implementation plan 78
6.7 Planned Outcomes: Year 1 86
6.8 Critical Success Factors 89
7 CONCLUSIONS 90
APPENDICES 91
A SHAPE OF FINANCE 92
A.1 Introduction 92
A.2 Process analysis 93
A.3 Duplication of process activities 94
A.4 Fragmentation 97
A.5 Activity profile of core processes 97
A.6 Cost Analysis 98
A.7 Grade Analysis 104
B TRAINING NEEDS ANALYSIS 111
B.1 Introduction 111
C EMERGING HOSPITAL GROUPS 115
C.1 Introduction 115
C.2 The emerging group structures 115
C.3 Steps towards a new operating model 116
C.4 Dublin East 117
117
C.5 South / South West 118
118
C.6 Dublin North East 119
C.7 Dublin Midlands 120
C.8 West / North West 121
C.9 Mid West 122
D CASE STUDIES 123
D.1 Business partnering 123
D.2 Shared services 126
D.3 Big Data 126
E OPTIONS APPRAISAL 129
E.1 Introduction 129
E.2 Compliance 129
E.3 Transaction processing 137
E.4 Business Partners 143
F ORGANISATION DESIGN 145
G BUSINESS INTELLIGENCE 148
H SENIOR FINANCE TEAM VIEW OF CURRENT
INFORMATION SYSTEMS 150
I KEY STAKEHOLDERS CONSULTED 151
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FIGURES
Figure 1: Finance Operating Model 16
Figure 2: The Current Operating Model 20
Figure 3: The current shape of Finance in the HSE 22
Figure 4: The variation in support across the statutory and
voluntary sector 27
Figure 5: The Role of the CFO 37
Figure 6: The differing roles of operational and financial
managers in the context of budgetary control 38
Figure 7: The Emerging Landscape 40
Figure 8: The Commissioning Wheel for the NHS 42
Figure 9: The planning and operational processes that could
follow from the MFTP 44
Figure 10: How leading organisations have transformed their
finance operations 46
Figure 11 The new operating model for Finance 60
Figure 12: The New Service Delivery Model 61
Figure 13: Business Partnering Roles 65
Figure 14: Organisation Structure 66
Figure 15 The transition steps towards a future operating model 70
Figure 16 The interim organisational structure 70
Figure 17 The transitional operating model for Finance 72
Figure 18 Transitional Management Structure 73
Figure 19 High level road map 79
Figure 20: WTE by core and non-core finance processes 93
Figure 21: The Current and Future shape of Finance 93
Figure 22: Compliance 94
Figure 23: Transaction Processing 94
Figure 24: Decision Support 96
Figure 25: Decision Support 97
Figure 26 Compliance 98
Figure 27: Transaction Processing 98
Figure 28: Cost versus time as a % total (excluding non-core) 100
Figure 29: Analysis of grade by process 104
Figure 30: % of time spent on activities (by grade) 105
Figure 31: Business Partner – Manager 113
Figure 32: Business Partner - Team Member 113
Figure 33: Operations Excellence - Manager 114
Figure 34: Finance Specialist - Manager 114
FIGURES AND TABLES
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TABLES
Table 1 Phase 1 of the Finance Reform Programme 15
Table 2: Current skills and capabilities 26
Table 3: Cost by Finance Service (excluding non-core finance
processes) 28
Table 4: Cost by Finance Activity 29
Table 5: Changes required in financial management practices 52
Table 6: Delivery Options and Evaluation Criteria 55
Table 7: Roles and Responsibilities within the Transitional
Operating Model 74
Table 8: Critical Success Factors 89
Table 9: Cost, WTE and number of locations by activity 99
Table 10: Cost by grade and process 100
Table 11: WTE numbers by grade and process 104
Table 12: Analysis of Respondents by Grade 112
Table 13: Analysis of Respondents by Age, Qualifications &
Experience 112
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A fundamental change in the way that financial
management operates across the health system in Ireland
is essential to underpin the reform envisaged in Future
Health and to address recognised weaknesses in current
financial management systems and infrastructure. This
change goes beyond the need for new systems and
processes and requires a positive response from both
finance professionals and non-financial managers,
recognising new roles and owning their budget
management responsibilities. A new operating model
provides the blueprint design to shape that change
ensuring alignment with desired outcomes.
1.1 Background and context
The Health Service in Ireland has embarked on a major programme of
change. Future Health: A Strategic Framework for Reform of the Health
Service 2012-2015 sets out the main healthcare reforms that will be
introduced in the coming years, as key building blocks for the introduction of
Universal Health Insurance in 2016. Future Health will focus on the needs of
the patient even as difficult decisions on health financing are made.
Since the Health Service Executive (HSE)’s establishment, the Finance
function has worked hard to support financial management across the
diversity of the HSE’s services despite the challenges of multiple systems
and many manual, non-standard processes which add complexity and a lack
of transparency and flexibility in reporting.
It has become clear that the current financial management arrangements
will no longer meet the needs of the emerging health system and the
structural change required to support it.
The establishment of hospital groups, new structures for primary care and
community services, the development of formal purchaser / provider
arrangements and the establishment of a Healthcare Commissioning
Agency (HCA) will bring new requirements for financial management, as will
the changing funding arrangements arising from Universal Health Insurance
(UHI). It will also bring about a change in the role of the Department of
Health in the wider health landscape, and a need to build and develop new
relationships across the system. These new relationships will bring new
requirements from a financial management perspective.
1.2 The Finance Reform Programme
The Finance Reform Programme has been established in response to
reports into financial management practice in Health by Ogden and PA
Consulting during 2012. This programme is the beginning of a journey of
change in culture, systems and processes across the organisation that will
1 INTRODUCTION
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transform finance operations. The programme aims to develop more
effective financial planning and management and build a more cost
conscious culture across the Health system by:
? enhancing financial management knowledge, skills and capability both
within Finance and amongst service managers and clinicians;
? securing ownership for financial performance at inter-departmental,
strategic and operational levels by improving service planning, budgeting
and performance management and reporting;
? having a better understanding of the cost of service provision across the
system, which aligns current activity and future demand;
? adopting multi-annual planning and budgeting to support reform and
deliver cost reduction in a sustainable way;
? being clear about responsibility and accountability, and ensuring the
system impact of poor performance is understood and responded to;
? simplifying and standardising systems and processes; and
? ensuring financial management support to services is fit for purpose and
delivered by the right people, in the right place, at the right time.
PA Consulting was appointed to support the Finance Reform Programme in
November 2012. PA supported the programme in a number of key areas
with a view to establishing the foundations of the programme which will be
delivered over time. Work on the finance operating model is one aspect of
this support, as illustrated below.
Table 1 Phase 1 of the Finance Reform Programme
PMO and Programme Management Driving the pace of change and
ensuring a sense of purpose
Service Planning, Budgeting and
Cost Containment
Greater clarity and confidence in 2013
Budget and Service Plan and a new
process for 2014
Performance Management and
Accountability
Establishing the framework to change
behaviours through improved
performance management and
reporting arrangements evidenced over
time through changed behaviours
A new operating model for Finance Building the foundations for
transformation
Financial Strategy, Service
Improvement and Future Health
Building the capability for the future
1.3 How an operating model will support the
scope and scale of change required
An operating model describes how each of the components of a function or
organisation will fit together to deliver an efficient and effective service,
aligned to new requirements. In developing a new operating model for
Finance we will address the weaknesses identified in current systems and
process, and ensure that Finance skills and capabilities are developed to the
extent that the emerging financial management needs of the health system
are met by new ways of working.
This work provides insight into how finance is being delivered across the
health system: nationally, regionally and locally, supporting both statutory
and voluntary service providers. We identify and evaluate alternative options
to deliver finance services to meet emerging future requirements.
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Figure 1: Finance Operating Model
Development of a strong operating model supports a clear understanding
across the organisation of the desired outcome of change initiatives
underway and will ensure that all aspects of the operating model are aligned
and support the achievement of these wider goals.
1.4 Our Approach
This project is a key outcome of phase one of the Finance Reform
Programme and will define the next steps to support changes to financial
management practices across the system.
This project is sponsored by the CFO Tom Byrne and Mark Fagan provided
project management support and acted as key liaison with the HSE finance
community.
The project has involved a combined team from the HSE and PA
Consulting, bringing together expertise from both organisations.
The Senior Finance Team acted as a steering group, and a Working Group
was established to support key aspects of project delivery.
Our approach involved the following logical steps:
? Understanding the current position; informed by engagement, data
collection and the findings of recent reviews by PA Consulting and
Ogden into financial management practice;
? Identifying future requirements; drawing from the requirements of Future
Health and our insights into financial management leading practices;
? The development of options; and the assessment of these options
against overall requirements and the insights of the working group as to
the specific requirements of the system; and
? Recommendations for the design of the Finance Operating Model.
A critical element of our approach was to begin the journey of change during
the analysis by involving key individuals at all stages.
Collaboration and engagement with those that are experienced in HSE
finance was supported though a workshop based approach, involving
representatives from both statutory and voluntary service providers, and
process specialists from across all finance specialisms.
Targeted data collection activity was undertaken to provide a baseline
position to support any case for change, to understand the current shape of
finance, and to identify the training needs of the wider finance community.
This process was designed to enhance rather than duplicate any previous
data collection activity, to enable the development of an understanding of
the entirety of finance operations across both statutory and voluntary (s38)
providers.
1.5 Structure of the report
This report presents the conclusions of our work in developing a new
operating model for Finance and draws upon insights into current working
practices gained through engagement across the system, in discussions
during formal workshop sessions and from insight and analysis arising from
Culture and
behaviours
Services
FINANCE
OPERATING
MODEL
Structure
Skills and
capability
Information
and
technology
Process
Governance
and
controls
The operating model is a
representation of how HSE
Finance operates now, and could
operate in the future in terms of:
? Services to be delivered
? Systems requirements
? Process
? Governance and controls
? Information and technology
requirements
? Skills and capabilities
? Culture and Behaviours
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CONFIDENTIAL – between PA and The Health Service Executive
data collection undertaken. Views on future requirements, delivery options
and implementation challenges were sought from the Senior Finance Team,
process specialists and members of the working group, and this feedback
has shaped our thinking and is reflected in the proposed way forward, which
addresses the points raised in earlier reviews of financial management
practices and from Future Health.
? Chapter 2 describes the current operating model for financial
management across the HSE, highlighting areas of good practice, and
identifying aspects of the operating model that are not aligned with new
requirements of finance or good practice;
? Chapter 3 describes how financial management must evolve over time to
ensure that the changing financial management requirements of the
health system are supported effectively;
? Chapter 4 outlines the options considered in relation to key aspects of
financial management;
? Chapter 5 describes how financial management will operate in the future
to enable the CFO to discharge his accountabilities for financial
management across the system; and,
? Chapter 6 presents the implementation strategy and describes the step
changes to the operating model proposed over time to ensure continuity
and stability in financial management in a complex, changing
environment, and outlines a programme for change over a three year
period and a clear view of immediate actions required.
? Chapter 7 presents conclusions and recommends that Phase 2 of the
Finance Reform Programme to implement the new Finance Operating
Model commences with immediate effect.
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The current operating model for finance has evolved over
many years as the structure of the organisation it supports
has changed. The shape today is a combination of the
existing structure of the HSE (formed in 2005) and that of
its predecessor (the Eastern regional health authority
(ERHA) and boards). It incorporates many examples of
good practice, achieved in spite of variations in processes,
multiple financial systems and limited engagement with the
voluntary sector. This achievement is due to the
professionalism and hard work of the finance team.
However, the new requirements for finance and the
weaknesses identified in earlier reviews means that the
current operating model is not fit for future purpose.
2.1 The Current Finance Operating Model
In this section, we analyse the strengths and weaknesses of current
financial management practice across the HSE by describing the Current
Operating Model. Informed by interviews, the results of data analysis and
workshop discussions, we consider financial management in the context of
the following operating model elements:
? Customers;
? Service delivery model;
? Process, governance and controls;
? Information and Technology; and
? Skills, capabilities, culture and behaviours.
In doing this we have developed real insight and understanding of current
ways of working, which will be used to define the extent of change required
and enable examples of good practice to replicated across the system.
2.1.1 Data collection approach
Our understanding of the current operating model was significantly
enhanced by the results from two comprehensive data collection exercises:
? The shape of finance; and
? A training needs analysis.
The HR census in December 2012 states the headcount within National
Finance as 513.5 whole time equivalents (WTE). Due to limitations in the
way in which staff resources are categorised in other parts of the health
system, there is no way of knowing the extent of financial management
support being delivered by staff out-with National Finance other than by
undertaking a data collection exercise. The shape of finance survey was
designed to capture the amount of WTE involved in core finance processes.
The results provide an analysis of the proportionality of services – decision
support, compliance and transaction processing across finance in terms of
2 THE CURRENT SHAPE OF FINANCE
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CONFIDENTIAL – between PA and The Health Service Executive
time and cost. Overall, responses received identified 1,628 staff
representing 1,273.5 WTE. This includes staff employed directly within
National Finance, and those in local finance functions in National Services,
and in Health and Social Care Providers (HSCPs) from both the statutory
and voluntary sector. Our detailed analysis is presented in Appendix A.
In total 136 template returns were included in the analysis comprising:
? 23 of the 32 Local Health Offices(LHOs);
? 9 of the 38 S38 community providers;
? 20 of the 29 statutory acute hospitals;
? 9 of the 16 S38 voluntary acute hospitals; and
? 75 for other National Services such as National Finance (both corporate
and regional), National Shared Services and National Cancer Screening
Service.
The returns are therefore representative but not complete. Whilst they
provide sufficient insight into the current state of finance for the purposes of
this exercise there would be real value in completing the analysis to inform
the detailed design phase and accurately quantify the business case for
change.
The training needs analysis survey was developed to assess the
requirements for the training and development of future skills and
capabilities identified.
702 employees completed the survey from the 1,628 employees identified in
the Shape of Finance exercise. Again this is not a complete picture but
supports the identification of the broad skills gap and training required for
the system. Figure 2 below summarises the current operating model and it is
explained in the following paragraphs. Our detailed analysis is presented in
Appendix B.
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Figure 2: The Current Operating Model
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2.1.2 Customers
Financial management is provided across the entirety of the HSE and to the
Department of Health and Department of Children and Youth Affairs (DCYS)
by a combination of National, Regional and locally based finance teams.
The level of service provision and standards are inconsistent across the
customer base, with the greatest level of resource is focused at a regional
and local level:
? Regionally based finance teams provide accounting and decision support
services to the Regional Director of Operations to support his/her budget
management role. They also support local finance teams within statutory
acute hospitals;
? National Shared Services provide transaction processing services to
statutory acute hospitals; and
? Primary, Community and Continuing Care (PCCC) and voluntary
hospitals have local teams providing decision support and transaction
processing services.
Services provided to other parts of the health system are less
comprehensive, particularly in the context of financial management advice
and decision support:
? There is a recently established finance team within Primary Care
Reimbursement Service (PCRS) ;
? DCYS receive financial accounting and transaction processing services
through a service level agreement;
? National Services such as the National Cancer Screening Service have
local finance teams in place;
? National Finance supports corporate budgeting and the provision of
financial advice to the Department of Health, Fair Deal and Pensions;
and
? There is limited support provided at an operational finance level within
HSE Corporate and the National Ambulance Service.
2.1.3 Service Delivery Model
The service delivery model has evolved over multiple organisations and is
characterised by high variability and inconsistency.
There are three service categories currently being delivered across the
health system: transaction processing, compliance and decision support.
Transaction processing
The main transaction processing services provided are outlined below.
? Order to receipt
? Invoice approval to payment
? Payroll changes
? Payroll processing
? Private health claims
? In-patient statutory charge
? Road Traffic Accident (RTA) claims
? A&E cost recovery
? Other income
? Cash management and debt recovery.
These services are currently provided by operational finance teams or
Shared Services.
For some statutory organisations, invoice approval to payment, private
health claims income collection and cash matching and debt recovery
services are provided by Shared Services from eight locations. Staff
involved are located in the regional offices and will be managed by Shared
Services (this change is partially implemented).
Voluntary hospitals and PCCC have their own teams for invoice approval to
payment, private health claims income collection services and cash
matching and debt recovery.
Payroll processing for the statutory providers takes place in nine payroll
departments.
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Both statutory and voluntary organisations have staff who perform the front
end of finance transaction processes – order to receipt, payroll changes,
private health claims preparation, RTA claims, A&E cost recovery and other
income.
Compliance
The main compliance services provided are outlined below:
? Governance and controls
? Period end closure
? Cash management
? Financial statements
? Treasury / Vote
? Capital accounting
? Financial risk management and insurance
? Taxation
? Systems support.
Aspects of compliance are delivered by National Finance, Shared Services
and Operational Finance teams.
Strategic compliance (policy, guidance and governance) is mainly delivered
by centralised National Finance teams and through regionally-based finance
teams.
Other staff are involved in operational compliance – for example, Shared
Services produce payroll tax returns and regional operational finance are
involved in period end processing.
Decision support
The core decision support services are outlined below
? Financial strategy and planning
? Corporate budgeting
? Corporate financial management and reporting
? Programme financial management and reporting
? Operational budgeting
? Operational financial management and reporting
? Cost containment planning
? Costing
? Provision of financial advice
? Value for money
Decision support is provided by National Finance, Regional Finance and by
local operational finance teams within health and social care providers,
either in hospitals or LHOs.
2.1.4 Process, Governance and Controls
The Shape of Finance analysis (Appendix A) highlights that a
disproportionate share of finance resources are supporting Transaction
Processing (63%), with 19% of effort supporting Compliance and the
remainder (18%) in Decision Support.
This compares unfavourably to a traditional finance function which would
typically focus 45% of effort on Transaction Processing, 35% on compliance
and the remaining 20% on Decision Support.
Figure 3: The current shape of Finance in the HSE
63%
45%
19%
35%
18%
20%
0% 20% 40% 60% 80% 100%
As Is
Traditional
TRANSACTIONAL
COMPLIANCE AND CONTROL
DECISION SUPPORT
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We looked further to understand the nature and characteristics of the
processes supporting the core finance functions and governance and
controls in place and found:
? Processes are characterised by inconsistency, duplication and are
resource intensive: and
? Governance and controls are resource intensive due to the manual
nature of the controls framework and complexity in line of sight arising
from the multiple finance systems in operation.
The proportion of time spent on transaction processing is directly related to
the degree of manual intervention required and the non-standard nature of
core processes. The lack of integration between systems supporting end to
end processes such as HR, procurement and Payroll is also a factor. There
is evidence of significant variation in the front end of core processes, such
as requisitioning and, timesheet entry, with limited self-service (where users
are responsible for inputs and outputs to the system) and system based
controls in place. 42% of transaction processing activity supports the front-
end of core processes.
The following observations support these conclusions, and relate to the
statutory organisations unless otherwise stated. Voluntary providers have
local teams providing most of their services and in many instances have
invested in improved systems and processes to support core financial
management practice:
? Payroll processing is inconsistent and fragmented
Payroll processing reflects the former health board structures with
different systems, processes and delivery models in place in each board
area, including both internal and external processing and support
models. Payroll processing is undertaken in 60 locations. The front end
payroll changes are typically manual, with very little use of self-service;
? Creditor account processing is highly variable and often manual
Creditor accounts are paid through 8 regional offices. The invoices are
processed locally (in 99 locations) by procurement or finance staff and
sent to the regional office for payment. Finance staff based in the
regional offices are responsible for ensuring that the accounts are paid
correctly and on time and that the ledgers are updated to reflect the
transactions. The front end order to receipt processing ranges from
highly manual to highly automated;
Income processing is non-standard and fragmented
Income is billed, pursued, receipted and accounted for by finance
1
staff
at approximately 31 acute hospitals, 184 PCCC locations and 8 regional
offices throughout the country.
Each location is responsible for maintaining accurate debtor accounts in
respect of hospital and other charges. Staff in the location investigate
and resolve billing disputes and are responsible for pursuing outstanding
amounts via standardised follow up procedures (including referral to debt
collection agencies). They generate credit notes, issue amended
invoices and write off bad debts;
? Decision support is variable and focused on “backward- looking”
monitoring and performance reporting
The approach to decision support varies across the regions e.g. different
reporting templates and assumptions. There is also variation in the
support provided at an operational level in hospitals and ISAs (Integrated
Service Areas).
Decision support effort is mainly expended on ‘backward-looking’
monitoring and evaluation activity. Operational budgeting, operational
financial management and reporting, programme financial management
and reporting, corporate financial management and reporting, corporate
budgeting and cost containment planning account for 70% of the time
spent on decision support;
? Compliance is resource intensive and complicated by process
variation and multiple systems
The published Annual Financial Statements are compiled by
consolidating 13 individual financial statements from each of the former
1
Data as per the NFPS business case
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CONFIDENTIAL – between PA and The Health Service Executive
Health Boards and streamlined agencies, each of which are prepared
from the legacy financial systems in place in their area;
Whilst significant compliance layers are in place – financial regulations,
assurance / compliance statement – the line of sight is complicated by
process variation and multiple systems; and
The Shape of Finance analysis identifies examples of process
fragmentation; where an individual supports a number of finance
activities. In these circumstances there is a risk that skills, capability and
service quality are undermined, spans of control weakened and there is
increased risk of irregularity. To illustrate, the analysis shows that at
Grade VIII staff supported on average 11 different finance activities.
In summary, processes supporting core finance services are not
standardised, often manual in nature and are supported by multiple
systems, which drives duplication, inconsistency in quality and standards
and a resource intensive and often ineffective controls environment.
2.2 Information and technology
The information and technology landscape is complex and reflects many
years of under-investment. Multiple finance systems and version variability
in support tools, such as Excel are a common feature.
As a consequence the production of timely, reliable management
information on which to base informed financial decision making is
compromised and highly resource intensive.
Voluntary providers are required to provide financial information in a
prescribed format to enable consolidated reporting monthly via Internal
Monthly Returns (IMR) and annually through Annual Financial Statements
(AFS). Each entity has their own IT infrastructure in place, the maturity of
which varies.
Engagement through stakeholder interview and in workshop sessions has
identified challenges in Data Governance and the Financial Systems
themselves, which are explored below:
Data Governance
? Data ownership is poorly defined and data is managed at a system level
rather than as a corporate asset;
? There is no common chart of accounts in place;
? Data definitions are inconsistent ;
? Coding structures developed for core feeder systems are not aligned or
integrated; and
? Standard reports for management accounting purposes are not
prescribed.
Financial Systems
? The need to consolidate data from 30+ external feeder systems at period
end results in significant manual intervention, reconciliation and time
delays in closure;
? Month end reports are not circulated to budget holders until day 10 and
corporate finance do not receive a consolidated view of spend until day
15;
? There are eight separate instances of finance and procurement systems
in place, each disparate, with different systems supporting General
Ledger, Accounts Payable and Procurement functionality, including SAP,
Masterpiece and Smartstream;
? Four payroll systems support the statutory sector. There is no integration
between HR and Payroll systems in place.
? Each HSE area has its own company code, employer Revenue
registration number and completes its own end of year tax return;
? For the statutory and voluntary sectors there are currently 55 separate
systems consolidated into the Corporate Reporting Solution (CRS);
? The budget is managed and reconciled in a 3-way system; the budget
system (SYNERGY), local general ledgers and in CRS.
? The manual nature (such as batch processing) of many processes
results in limited line of sight and inability to embed system based rules
and controls to improve financial management practice; and
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CONFIDENTIAL – between PA and The Health Service Executive
? Other than local pilots of patient level costing there is no single system in
place to support service line reporting and operational budgetary control,
and to support costing at an operational level.
Financial Reporting
? Consolidated financial reporting is provided by the Corporate Reporting
Solution (CRS) which provides information at
2
AFS / General Ledger
level only and does not allow drill-down as there is no integration with
feeder systems such as procurement and payroll. Further analysis
requires email requests to all systems owners across the country;
? CRS has limited flexibility as it reports against consolidated datasets
rather than the source data itself. Changes to reporting requirements are
time-consuming to address due to the need to maintain complex data
mapping arrangements;
? Multiple versions of the truth are in place: reports produced for different
audiences are not always consistent in structure and form; resulting in a
lack of confidence in the information provided; and
? There is limited use of self-service in place, mainly for report distribution.
2.2.1 Skills and Capabilities
A training needs analysis was undertaken through an online survey to
understand the age profile, qualifications, skills and capabilities and
experience of staff supporting financial management across the system.
Respondents were asked to self-assess their skills across a broad spectrum
of requirements.
Overall, 702 staff out of the 1,628 staff identified in the shape of finance
survey completed the online questionnaire. This includes staff employed
directly within National Finance, and those in local finance functions in
National Services, and in
3
HSCPs from both the statutory and voluntary
2
Annual Financial Statement
3
Health and Social Care Provider
sector. The total size of this population is unknown which was one of the
primary reasons for the data collection exercises but unfortunately there are
those who did not complete the template. The data provides a usable
sample for this analysis but more comprehensive data is required to support
implementation of changes.
Finance staff are insightful, innovative and committed but are challenged by
an inconsistent investment in training and development, in IT and the impact
of a number of years of headcount reduction which has added increasing
workloads.
There are examples of knowledge sharing across communities of interest
(such as the regional management and financial accounting teams) but
limited use of more innovative approaches such as e-learning to support
staff development.
Detailed analysis is presented in Appendix B. Key observations include:
? 111 qualified accountants out of the 702 respondents (16%), 73% of
which are Grade 8 and higher. Whilst numbers of trainee accountants
are not included (or identified through the survey), this statistic raises
concerns for succession planning;
? Only 8% of qualified accountants are in the age group 20-39. This is very
low and although it does not include those in training, it suggests a
significant skills gap that needs to be addressed;
? Responses indicated 280 team managers and team leaders managing
420 team members, which represents a ratio of 1:1.5 and highlights a
potential to examine layers of management and spans of control as part
of any detailed organisation design. However, there will be a range of
spans of control from large to small teams and managers working without
teams; and
? 69% of the staff supporting finance activities are aged 40 and above,
which although indicating considerable knowledge and experience
highlights a requirement for succession planning, particularly for finance
activities where deep technical or system knowledge is required.
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The table below provides a summary of the perceived strengths and
weaknesses amongst the following staff groups:
? Managers undertaking Decision Support
? Team Leaders in Compliance
? Team members in Transaction Processing
Table 2: Current skills and capabilities
Decision Support:
Managers
Compliance:
Team Leader
Transaction Processing:
Team Member
S
t
r
e
n
g
t
h
s
? Outcome focused
? Customer focused
? Delivery focused
? Verbal and written
communication skills
? Innovative
? Embrace change
? Effective
communicators is the
one Interpersonal skill
that is aligned with
the desired profile
? Confident using MS
Office applications
? Self-motivation is very
good
? Outcome focused
? Customer focused
? Delivery focused
? Organisation
awareness is high
W
e
a
k
n
e
s
s
e
s
? People management
? Contract negotiation
? Operations
management
? Business analysis
? Budget Setting
? Cost containment
delivery
? Building financial
models
? Fraud detection
? Taxation
? Treasury
management
? Improvement
techniques
? Financial
Management
? Financial Modelling
? Systems
administration and
data validation
? Operations
Management
? Business Analysis
? Process Improvement
In summary, there is good alignment between the desired and actual
behavioural skills of staff across the HSE. However the gap widens with the
other three categories; interpersonal skills, technical skills and decision
support skills. A successful transition to a new finance operating model will
require significant training tailored to the requirements of the new model.
This survey highlighted the shortage of qualified accountants in the 20 to 39
year old age bracket and it is important that staff are encouraged and
supported to continuously develop their technical and professional skills and
are subsequently rewarded with more challenging roles. Continued
Professional Development (CPD) programmes should be established and
monitored to support and to provide real time skills analysis data.
The area of training needs should be revisited as part of a detailed design
process so that the skills required for each grade within each service
delivery can be more specifically identified.
2.2.2 Culture and Behaviours
Perhaps the greatest challenge being faced is in changing culture and
behaviours across the health system and this is consistent with many
change programmes.
Changes to systems and process alone will not drive the change in
behaviours sought in order to improve financial management practices
across the health system in order to achieve a more cost conscious culture.
Currently culture and behaviours can be characterised as follows:
? Financial management is about reporting not control;
? Budget holders are rarely accountable for success or failure in achieving
budgets;
? Staff place a greater importance on meeting external requirements (for
example reporting to Revenue Commissioners and the Comptroller and
Auditor General over compliance with internal rules and regulations;
? A lack of trust pervades across the system: be it in the financial
information available, the budget holder’s ability to deliver services within
budget; in the wider system adhering to guidance, standard process and
deadlines. This is evidenced in the manual controls in place to check,
often multiple times, inputs to core processes;
? A low sense of ‘belonging’ to the HSE – there remains a strong
allegiance to the “regional jersey” and alignment to predecessor
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organisational structure rather than the HSE. There is no evidence to
suggest that this behaviour is limited to finance only. The implication is
limited cross fertilisation and proliferation of local ways of working; and
? Variation is the norm: there is limited adherence to corporate standards
and deadlines. There is a real belief that variation is essential to meet
local requirements. This sanctioned variation to the norm promotes
inefficiency.
2.3 Inconsistency in support levels and
standards
As mentioned above, there are significant differences in terms of systems,
process, culture and behaviours, skills and capabilities and structures
across the current finance operating model. This level of inconsistency
exists both at a national and regional level.
Currently, the customers of finance within the regional operations such as
the statutory and voluntary acute hospitals and PCCC organisations receive
various levels of service provision from Finance; the statutory organisations
receive greater support than the voluntary organisations. This should imply
that the statutory organisations spend less of their time on transaction
processing however our research suggests differently. The following chart
illustrates the resources allocated to transaction process, compliance and
decision support across the statutory hospitals and communities and the
voluntary hospitals and community. It highlights that the statutory
organisations, both hospital and community spend more time on transaction
processing than the voluntaries. This supports the anecdotal evidence that
the voluntary hospitals have invested greater resources in their financial
management systems relative to the statutory hospitals in recent years.
Figure 4: The variation in support across the statutory and voluntary sector
2.4 The provider landscape
Health services are provided by hospitals, Integrated Service Areas (ISAs),
grant funded organisations (S38 and S39) and national services.
The HSCPs are in transition to new organisational groups. Six new Hospital
Groups have been announced, and their composition is shown in Appendix
C.
Hospital Groups generally comprise a combination of statutory and voluntary
providers. Whilst voluntary providers may continue to have external
reporting requirements, within the HSE the distinction between statutory and
voluntary is removed as the Hospital Groups will work with HSE as a single
organisation (with several locations).
An analysis of the financial management arrangements in place across each
of the emerging hospital groups is presented in Appendix C. Further work is
required to complete this picture. The analysis presents the 2013 budget
allocation, the number of finance WTEs, the financial systems, the financial
performance and the maturity of financial management practice by hospital
for each group.
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This provides a useful snapshot of the current position and insight to inform
the direction of travel each group should take as it transitions to Trust status
over time, to ensure that financial management arrangements are
appropriate given the challenging financial context in which they are
operating.
It is clear that there is little correlation between size of budget, finance staff
in place and relative financial performance.
In general and not specific to any hospital in particular, this is down to a
number of reasons such as:
? Hospital spend is outside the control of finance – finance is seen purely
as a reporting function.
? Inappropriate resource selection – HR policy of filling a finance post at
most grades with a general administration person irrespective of
experience, knowledge or ambition perpetuates this problem.
? Resource allocation – the balance of WTE across transaction
processing, compliance and decision support is significantly skewed
towards transaction processing and as such the budget holder in the
individual health and social care provider is unlikely to get the support
needed in terms of decision support. In the case of one hospital,
transaction processing takes up 79% of finance WTE resource.
A similar exercise should be undertaken for community services once the
ISA review has concluded.
2.5 The cost of finance
Using the data collected as part of the Shape of Finance exercise, the cost
of supporting core finance processes is estimated at €74m. As previously
stated, the data analysis is representative, but not complete, and it would be
fair to assume that the financial case presented here is conservative as a
result. Non-core finance process costs of €11.1m are included in the €74m
and detailed below.
4
This cost has been derived on a ‘full cost basis’ comprising salary, salary
on-costs for PRSI and pensions, and overheads consumed (such as
accommodation, technology and training). To put this in context, the net
budget allocated to National Finance in 2013 was €48.3m, highlighting the
extent of resources supporting financial management which are not
managed directly by the CFO.
Our analysis has enabled an outline process “cost to serve” to be produced
and this is summarised in table 3 below and explored in detail in table 4.
Table 3: Cost by Finance Service (excluding non-core finance processes)
Finance Service WTE Cost €
Transaction Processing 690 33,988,059
Compliance and Control 207 13,559,411
Decision Support 195 15,270,307
Total 1092 62,817,777
The survey sought to collect volume information (e.g. number of purchase
invoices and number of payslips) but insufficient data has been returned to
enable transaction costs and a meaningful benchmarking to be undertaken
at this stage. Finance should continue to capture volume data, particularly
from the voluntary sector in order to identify opportunities to reduce
transaction volumes and simplify processes. Appendix A includes a
proposed list of data to be collected.
This is important to inform the future design and to provide guidance on the
overall shape of finance required going forward. Reviewing the cost to serve
data highlights areas where cost savings and efficiencies are possible, and
these are explored in further in Chapter 3.
4
Blended rate of 8% for PRSI, 9% for Pensions and 20% for overheads
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Table 4: Cost by Finance Activity
Transaction processing Locations WTE Cost
Order to receipt 78 98 €4,734,700
Invoice approval to payment 99 178 €8,608,780
Payroll changes 68 116 €5,636,377
Payroll processing 60 143 €7,147,621
Private health claims 28 70 €3,482,828
RTA claims 25 6 €335,620
A&E cost recovery 129 9 €460,515
Other income - car parks, restaurants 58 26 €1,343,688
Cash matching and debt recovery 56 44 €2,237,930
Compliance Locations WTE Cost
Governance and controls 86 27 €1,966,733
Period end closure 79 69 €4,242,995
Cash management 64 19 €1,202,174
Financial statements – HSE and schemes 58 18 €1,446,877
Treasury / Vote 32 7 €506,756
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Capital accounting 34 13 €813,435
Financial risk management and insurance 29 7 €461,299
Taxation (PAYE, PRSI, USC, VAT) 37 24 €1,403,532
Systems support 47 23 €1,515,610
Decision support Locations WTE Cost
Financial strategy and planning 63 14 €1,292,923
Corporate budgeting 37 7 €601,607
Corporate financial management and reporting 61 22 €1,822,695
Programme financial management and reporting 47 13 €992,793
Operational budgeting 79 22 €1,679,153
Operational financial management and reporting 86 52 €3,649,235
Cost containment planning 76 16 €1,468,328
Costing (job, project, patient level) 48 17 €1,142,115
Provision of financial advice 82 22 €1,853,988
Value for money 60 10 €767,470
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None-Core Finance Processes Locations WTE Cost
Corporate Governance 46 4 €379,632
Line Management 97 44 €2,961,162
General Administration 107 95 €5,048,343
Finance Related Project work 77 37 €2,690,248
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2.6 Strengths to build on and areas for
development
The current finance operating model incorporates many examples of good
practice, achieved in spite of variations in processes, multiple financial
systems and limited engagement with the voluntary sector.
Strengths that we want to build on include:
? Aspects of the existing service delivery model which support:
– business partnering (e.g. ANDOF
5
s, NCSS
6
);
– finance specialists operating as centralised corporate teams (e.g.
treasury, taxation, financial statements and corporate budgeting and
reporting); and
– the development of shared services.
? Plans in place within National Shared Services to develop standardised
and simplified processes and to invest in technology to improve and
streamline processes. Progress has been made on standardising the
payments process;
? Aspects of the financial management framework to support compliance
which are already in place: – financial regulations, assurance /
compliance statements; and
? The flexibility, professionalism and commitment of the finance team in
the way that they work within current structural and systems constraints
to meet customer requirements.
However the analysis of the current operating model has identified
significant areas to be addressed in any new model proposed. These
include the following:
5
Assistant National Director of Finance
6
National Cancer Screening Service
? Inconsistency in the level and standards of service provided to different
customer groups across the system;
? The extent of financial management activity being supported by teams
with no direct accountability or responsibility to the CFO;
? The extent of process variation, inconsistent data definitions and multiple
finance systems in place inhibit the ability of staff involved in decision
support and compliance to make best use of their skills and expertise;
? Effectiveness of decision support being compromised by time spent
validating and manipulating data to meet information requirements of
customers;
? A lack of shared ownership of transaction processes – finance, HR and
procurement results in duplication and inconsistency in processes and a
lack of integration;
? Significant under-investment in technology which has compromised the
ability of finance to improve current working practices;
? Weak accountability for actions and recognition that financial
management is a corporate responsibility undermines the controlling role
of finance; and
? A lack of investment in training and development of both finance staff
and budget holders to ensure that they discharge their financial
management responsibilities effectively.
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There are three distinct drivers for change in the financial
management practices within the health system in Ireland:
? current financial management practices are overly
resource-intensive and inflexible, and do not adhere to
many core leading practice principles;
? better financial management is required to provide key
stakeholders with the confidence that expenditure in
health is under effective control; and
the requirements of the emerging health system (Future
Health) means that the current finance operating model
is no longer fit for purpose.
In considering how these drivers will influence the future
operating model, it is important to draw from leading
practice principles. In this chapter, we explore both the
drivers of change and leading practice principles and
conclude by setting out the requirements for change
across the finance operating model for health in Ireland.
3.1 Drivers of Change
The review of current financial management arrangements secured
consensus amongst the finance community that the current operating model
is no longer fit for purpose. There are a number of opportunities to address
legacy weaknesses and these are explored further below.
The appointment of the CFO signals a clear response to stakeholders that
steps will be taken to demonstrate that the health budget is being spent
wisely and is subject to effective financial management and control. We
consider the changes necessary to ensure that the CFO can make this
happen.
The importance of effective financial management in securing the desired
outcomes from Future Health should not be underestimated. We consider
the requirements arising from reform which require a change in the way
finance operates.
3.1.1 Opportunities Identified by the Current
Operating Model
The review of the Current Operating Model highlighted opportunities to
address legacy weaknesses in financial management and highlighted areas
where cost savings and efficiencies are possible.
3 HOW FINANCE NEEDS TO CHANGE
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It is important to note that realising these savings is contingent on being able
to re-train and redeploy staff into different roles across the system as
process and system improvements change staffing requirements.
Our analysis and supporting high level costings are drawn from our Shape
of Finance work, and are based on an in-complete data-set. The detailed
analysis can be found in Appendix A. There is no doubt that a complete
picture would strengthen further the case for change
Transaction processing - Purchase to pay (P2P)
There are 277 whole time equivalents (WTE) supporting the P2P process in
over 99 locations at an estimated cost of €13.3m. The purchase to pay
process ranges from highly manual to highly automated.
There are opportunities to standardise, simplify and further automate the
order to receipt process, to reduce transaction volumes and to consolidate
accounts payable activity.
The P2P strategy must be developed in conjunction with procurement. We
are aware that there is parallel work to restructure procurement, stores
management and the order to receipt process underway.
To optimise benefits, it is critical that purchase to pay is reviewed from an
end-to-end process perspective through co-ordinating finance and
procurement initiatives. Particular initiatives to investigate from a process
perspective will include:
? Strengthen strategic procurement (commodity management and
structured strategic sourcing programme) to reduce the number of
suppliers and transactions
? Implementation of best practice e-procurement technology to further
automate the order to receipt process, reducing paper-based manual
ordering and reducing time in the approval process, and improving
financial control.
? Improved compliance management in relation to supplier, process and
contract.
Our analysis estimates a potential annual saving of €4.3m from automating
and streamlining the P2P processes.
The move to HSCP groups provides an opportunity to make a step change
within the current systems environment as we see legacy hospital and
PCCC finance teams merging at group level.
Transaction processing - Payroll
There are 259 WTE supporting the payroll process in over 60 locations at a
full cost of €12.8m.
Payroll processing staff are currently located in 9 departments and there are
a range of processing arrangements in place. The process for payroll
changes is largely manual. There are opportunities to automate the front
end of payroll through self-service technologies and as part of operational
systems development, such as the use of rostering systems to provide input
data.
The end-to-end payroll process redesign has to align with work in HR and
operations. There is a significant, but challenging, opportunity to reduce the
number of payrolls. There are currently 101 different payroll cycles (6
weekly, 75 two weekly, 4 four weekly and 16 monthly) and this figure does
not include all of the voluntary organisations.
Payroll process efficiencies will arise from:
? Standard payroll data capture, processes and procedures
? Centralisation of payroll processing
? HR and payroll systems integration
? Self-serve technology
? Automation of payroll changes through self-service technologies and
operational systems
? On-going benchmarking of payroll processes and costs.
The median benchmark for payroll staff to total employees is 1:1200.
Applying this benchmark to the HSE would suggest a requirement for 97
WTE to support the payroll process, some 162 WTE less than current
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staffing levels. A reduction of staffing at these levels equates to an annual
saving of €5.7m.
Transaction processing - Income
There are 113 WTE involved in the income process in over 100 locations at
a full cost of €5.6m.
Income processes across the system are inconsistent and range from highly
manual to highly automated pointing to potential opportunities from process
redesign, simplification and standardisation.
Whilst processing road traffic accident (RTA) income, accident & emergency
(A&E) and other income such as parking fees must remain local, the
creation of hospital groups will provide the potential for some consolidation.
There is the potential to increase the role played by Shared Services in
supporting Private Health Claims processing, and this should be considered
further in the context of the move to MFTP
7
and UHI
8
.
Our analysis estimates a target annual saving of €0.5m from automating,
standardising and centralising income collection. There are also cash flow
benefits to be derived from automated, efficient income processes
supporting all HSCPs.
Compliance
Compliance involves 207 WTE at a full cost of €13.6m.
Compliance is resource intensive due to the need to support multiple
systems and non-standard, often manual processes. Specialist advice and
support is often fragmented with an increased risk of inconsistency and
variations in the quality and extent of support provided.
Mandated common processes supported by a single integrated financial
management system with systems based controls system based controls
7
Money Follows The Patient
8
Universal Health Insurance
will improve the control environment significantly, and will limit the extent of
non -compliance across the system.
It will remove the requirement to support period end processing validation
and verification at current levels
Our analysis estimates a target annual saving of €4.2m from mandating and
standardising compliance processes.
Decision support
Decision Support involves 194 WTE at a full cost of €15.2m. Decision
support is currently inconsistent and focused on performance management
and reporting activities.
The move to HSCP groups will facilitate the introduction of a consolidated
model for operational financial management and reporting i.e. support will
be provided at a group rather than individual hospital or LHO.
The Shape of Finance survey estimated that 43% of senior finance staff time
was spent on processes other than Decision Support. Anecdotal evidence
suggests that a lot of this time is spent on validation of data prior to making
decisions
It is important that the improvements made in transaction processing and
compliance enable a shift in focus, and transfer of resources towards
Decision Support.
There are opportunities to invest in decision support to improve:
? The quality and extent of strategic planning and performance
management provided
? Ensure consistent and appropriate levels of decision support for all areas
of the system
? The extent of forecasting, scenario planning, benchmarking and
comparative analysis undertaken to improve decision making and
challenge current ways of working
We have assumed a saving of €2m is possible through more effective use of
resources, and increasing the time spent by existing senior staff in
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supporting decision support. There will be a further un-quantified benefit
from better decision making across the system overall, which should result
in better outcomes for patients as a result of more effective use of
resources.
Conclusion
The high level case for change arising from opportunities to address existing
weaknesses in financial management is compelling, and builds on the
earlier arguments supporting business cases for systems implementation
developed in recent years by the HSE.
The table below summaries the potential savings and estimates that €15.8m
in annualised savings could be achieved representing 21% of the cost of
finance.
Potential Savings Total €m
Purchase to Pay 4.3
Payroll 5.7
Income 0.5
Compliance 3.0
Decision Support 2.0
Total Potential Savings 15.5
Savings as % of total Finance Cost 21%
In addition to these financial savings, there are significant non-financial
benefits to be achieved. There is a strong case for investing in financial
management as a means of realising significant benefit from cost reduction
and efficiency across the system through improved decision making.
Opportunity Benefits
Transaction processing
? Automation of the end-to-end
process
? Simplification and standardisation of
processes
? Reduction in transaction volumes
? Consolidation of teams
? Enhanced control of pay and non-pay
expenditure
? Improved customer experience (e.g.
between shared services and
HSCPs). Operations excellence has
a focus on customer relationship
management
Compliance
? Simplification and standardisation of
processes
? Rationalisation of systems
? Controls embedded in systems
? Mandatory financial management
framework
? Strengthened control
? Simplified compliance monitoring
? Opportunity to implement automated
exception reporting software
? Staff able to focus more on proactive
advice rather than reactive support
? Efficiency savings or redeploying
resources to added value activity or
activity that currently can’t be
undertaken
Decision support
? Standardised reporting
? Standardised data definitions
? Alignment of management and
financial accounting – one version of
the truth
? Strengthened support to operational
decision-making at national, regional
and HSCP level
? Focus on analysis, not data
validation and manipulation
? Trust in the data
Skills and capabilities
? Training and development plans
? Succession planning and career
development
? Workforce better equipped to deliver
financial management standards that
finance staff aspire to – professional
qualifications, appropriate
development of technical skills.
3.1.2 Achieving greater financial control
The HSE has responded to recognised weaknesses in current financial
management practice by establishing a new role of Chief Financial Officer
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(CFO) The CFO’s appointment sends a clear statement of intent to
stakeholders that steps will be taken to improve confidence in financial
management practices and to achieve greater financial control.
The CFO has accountability for financial management across the entire
health system. To discharge that accountability the CFO must ensure that
the financial management framework enables him to deliver against all four
facets of his role described in figure 5 below.
? Stewardship and accountability: ensuring the compliance framework is in
place to provide and true and fair view, and trust in the financial
information provided; and
? Financial Management: ensuring practices across the system inform
decision making, promote probity and value for money and a culture of
cost consciousness and continuous improvement.
? Corporate Leadership: as a Board member providing strategic direction,
effective corporate governance and building strong relationships; and
? Professional Leadership: driving professional standards, leading the
profession and building capability across the system.
This role cuts across the entire system and relates to financial management
practices supported by the CFO and his staff in controlling finances and
providing advice and support to Budget Holders in delivering services within
agreed resources.
The current operating model does not provide the CFO with the adequate
tools to discharge this responsibility.
The CFO is responsible for putting a financial control framework in place
and ensuring advice and support is provided to budget holders. He must
have the ability to escalate where exceptions are identified through
performance management or other channels to ensure that budgets are
managed effectively.
Key to this will be:
? building a culture of corporate responsibility for financial management;
? ensuring that budget holders have information and advice to support
expenditure decisions;
? mandating a system wide financial management framework;
? establishing training and development support and career development
plans;
? developing skills and capabilities for key finance roles and implementing
compulsory Continuous Professional Development (CPD) for all finance
professionals; and
? learning and development for both finance professionals and non-
financial managers to be recommended and supported by the CFO. In
particular, we recommend that all new budget holders receive training in
their financial responsibilities.
Understanding the different, but complementary roles, of operational and
financial managers in the context of budget management is critical to
ensuring an effective system of financial control across the system. Figure 6
overleaf outlines the roles as presently understood.
Figure 5: The Role of the CFO
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Figure 6: The differing roles of operational and financial managers in the context of budgetary control
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3.1.3 The emerging landscape and requirements for
financial management
The long term changes in Ireland’s health system, as described in Future
Health: A Strategic Framework for Reform of the Health Service 2012 –
2015) have significant implications for finance. In particular, finance has to
respond to the HSE moving to a commissioning body, funding based in part
on money follows the patient and budgets organised by national care
groups. Whilst finance has traditionally found innovative solutions to new
requirements, the consensus of the Working Group is that the current
operating model cannot effectively respond to these changes. Figure 7
overleaf is our interpretation of the emerging landscape and the primary
changes are:
? The transition from the HSE to the HCA;
? The changing relationship with the Department for Health;
? The financial management requirements from Money Follows the
Patient;
? The changing Provider landscape; and
? The introduction of UHI.
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Figure 7: The Emerging Landscape
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The transition from the HSE to the HCA
One of the key features of Future Health is the separation between the
agency purchasing health services and the agencies providing those
services. This objective will be fulfilled with the establishment of the
Healthcare Commissioning Agency, planned for Q1/Q2 2014. Currently,
healthcare is both commissioned and provided through the HSE with the
exception of ancillary health services which are provided through grants to
the voluntary sector.
Five National Directors accountable to the Director General for acute,
primary care, social care, mental health and health and wellbeing services
have been appointed. They are responsible at national level for the reform
and delivery of services in their specified service domain, and the
development of national service strategies and strategic commissioning
frameworks for their areas of responsibility. Their role starts to model the
type of management approach that will be in place once a fully-fledged
commissioning model is in operation.
Performance management and responsibility will reside at the most
appropriate level with HSCP CEOs (or equivalent) having performance
management as a core part of their roles. RDPIs
9
will serve as ‘Contract
Managers’ at a regional level and will be expected to manage performance
issues directly with HSCP CEOs in the first instance. ‘Exceptional’
performance issues will be dealt with through a formal escalation process.
The HSE will introduce an interim performance contract which will integrate
the key performance and financial targets of the service plans and cost
containment plans, set out the performance management requirements and
conditions as well as intervention and support provisions.
From a financial management perspective, transition to the HCA requires
the provision of financial advice and support to the National Directors and
RDPIs and requires a view of financial information by care group (nationally
and by region).
9
Regional Director for Performance and Integration
Commissioning creates a need for decision support services which draw
upon financial and non-financial information (such as demographics and
health economics). Decision support services typically include:
? Strategic planning: scenario planning around levels of activity and
performance to inform external and internal resource allocation and
policy and best use of resources; and
? Procuring services: shaping health care provision and using tariff and
patient costing information to inform distribution of activity targets to
health care providers.
The appointment of the National Directors means that finance will need to
prepare cash and expenditure budgets and report cash and expenditure by
care group, with drill down to underlying transactional detail. This has
implications for coding structures to enable income and expenditure to be
recorded by care group and region. The ability to do this will depend upon
coding structures in feeder systems and the general ledger.
The separation of commissioning services and service provision exists in
other health jurisdictions. The following describes the arrangements for the
NHS in England, and figure 8 illustrates the framework in place to support
commissioning arrangements.
From April 2013, Clinical commissioning groups (CCGs) are the cornerstone of
the new health system. Each of the 8,000 GP practices in England is now part of
a CCG. There are 211 CCGs altogether, commissioning care for an average of
226,000 people each. CCGs will commission the majority of health services,
including emergency care, elective hospital care, maternity services, and
community and mental health services. In 2013/14 they will be responsible for a
budget of £65 billion, around 60 per cent of the total NHS budget.
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The RDPIs will require support for performance management and planning,
in particular, to monitor and evaluate HSCPs, the analysis of financial
performance (including cost containment plans) with a risk rating to indicate
if further information or intervention is required and benchmarking of unit
costs.
The changing relationship with the Department for Health
The relationship with the Department of Health will change because of:
? Return of the Vote to the Department in 2014, which will result in a
significant change in the relationship and financial governance
arrangements that exist between the HSE and the Department of Health
at present.
? The changing role of the department as the HCA (with a direct reporting
line to the Minister) is established in the move to the separation of
commissioning and provider.
At the very least these changes will require the ability to be flexible in
reporting spend, both on a cash and income and expenditure basis, and
there will inevitably be changing financial reporting requirements as
commissioning becomes a reality.
The changing relationship between commissioners and providers, and the
inevitable change in the level of detail reported to the Department for Health,
where there will be a greater focus on strategic rather than operational
information, will have consequences in terms of culture and behaviour for
both the Department and the HCA as the system emerges.
Figure 8: The Commissioning Wheel for the NHS
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The financial management requirements from Money Follows the
Patient
Under money follows the patient (MFTP) payment will be made on the basis
of each patient seen or treated, taking into account complexity of healthcare
needs and will therefore replace block grant allocation for activities in scope.
Implementation of the HCA will see the use of Performance Contracts to link
payments with the achievement of targets. The System Reform plan
anticipates that MFTP will be operating in shadow form in 2013 and is
planned to be fully operational from 2014. Work is underway to develop a
national tariff based on an assessed level of complexity and case mix. The
following flow charts are our interpretation of the planning and operational
processes that could follow from the MFTP policy papers.
From a finance perspective, capacity and capability will be required at two
levels:
? Nationally to determine the DRG (diagnosis related group) pricelist,
support budget and performance scenarios, convert national metrics into
performance contracts, monitor performance contracts, maintain systems
to , convert claims into tariffs, audit and pay claims. In particular, finance
will play a role in supporting over/under-trade activity analysis to
understand the system wide impact; and
? Locally (within HSCPs) to prepare claims and deliver patient costing and
service line reporting.
MFTP has to be supported by a patient costing system which both provides
costing information to inform tariff setting and enables HSCPs to understand
their performance relative to the tariffs set. The patient costing system
should be supported by a standard costing manual and collation/sharing of
patient level costing expertise. A system is also required to support claims
management.
It is our understanding that MFTP will operate on average tariffs. When
MFTP has been implemented there is typically a 2-3 year period of support
to allow providers with costs above average to revise ways of working.
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Figure 9: The planning and operational processes that could follow from the MFTP
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The changing Provider landscape
One of the fundamental changes envisaged under Future Health is the
establishment of independent hospital trusts. The reorganisation of acute
hospitals into groups, each with their own Board and Group Chief Executive,
is a cornerstone of Government policy. Six hospital groups have been
created on an administrative basis that will see operational responsibility for
all statutory and HSE funded hospitals transfer to Hospital Group Chief
Executives and interim Boards, who in turn will report into the National
Director for Acute Services. Hospital Groups will eventually become
independent hospital trusts, however they will in the interim each have a
Hospital Group Board with an independent Chair.
Plans for the structures of primary care, social care, mental health and
health and wellbeing services are at this stage less developed than for acute
hospital services. However what we currently know is that:
? Primary care, social care, mental health and health and wellbeing
services will be managed within an integrated management structure at
the level of what are currently described as Integrated Service Areas
(ISAs). This will include HSE funded agencies in these service areas.
? A review of ISAs will be undertaken in 2013. This review is expected to
lead to a reduction in the number of ISAs nationally.
From a financial perspective, the move to HSCP groups creates the
following financial management issues and requirements:
? Rationalisation of finance systems, processes and finance teams within
HSCPs;
? Operational financial management: support to HSCP operational
managers in areas such as service line management, operational budget
management and cost containment plans. Operational financial
management business partners and management accountants will
provide this support; and
? Potential implication for grant funded bodies and primary care providers
following introduction of commissioning frameworks. Evidence from
England is that consolidation of the market and market forces can drive
some social care providers out of business.
The introduction of UHI
The current plan is to move the health service from a tax funded system to a
combination of UHI and tax funding from 2016. Under this arrangement,
claims for payment for health services within the scope of UHI will be
submitted to insurance companies for payment.
This will result in a further change in funding arrangements from the system,
and may lead to insurers being funded directly from the Department, and the
HCA as commissioners relying on the UHI provider to provide core
information on service levels and spend to enable contract management to
be supported. This will require support mechanisms similar to MFTP –
patient costing system and a claims management system – and is likely to
be an enhancement of the system adopted to support tariffs, with an
underlying change in roles, responsibilities and accountabilities. Both MFTP
and UHI require a patient costing system and a claims management system.
Under UHI, responsibility for approving claims and paying HSCPs will
transfer to the insurance companies.
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3.2 How Finance functions in other
organisations are transforming
The "traditional" finance function is characterised by a significant investment
in terms of people, and cost, in core finance operations processes, such as
general accounting, reporting and transaction processing, with less of a
focus on policy development and decision support.
In recent times there has been an increased focus on "professionalising" the
Finance function with a focus on skills and capability development around
the following areas:
? Effective leadership
? Cost conscious culture
? Professionalism Expert central functions
This implies a step change in the way finance supports the organisation,
involving a shift in resources from finance operations towards decision
support, with finance shaping future strategic direction and adding real value
in embedding that cost conscious culture across the organisation.
This new approach has its origins in the HR model developed by Dave
Ulrich of Ross School of Business at the University of Michigan. Ulrich
introduced the concepts of three business components: business partners,
specialists and operations excellence.
Achieving this shift is challenging, however, as the “engine room” needs to
operate effectively if the Finance function is to have credibility in the
organisation, and is to earn the right to act as trusted adviser, participating
more in added value activities such as decision support and policy and
strategy development. This move, beyond governance and probity, to
supporting the commercialisation of services and ensuring decisions have a
sound financial footing, is essential to support the change agenda.
The figure below illustrates how leading organisations have transformed
their Finance operations, to refocus resources to higher value decision
support services, whilst ensuring the “engine room” or core financial
administration is operating as efficiently as possible.
Figure 10: How leading organisations have transformed their finance
operations
There are three underlying prerequisites of a best in class finance operating
model:
? A Financial Management Framework that sets the rules to achieve
desired behaviours;
? Ensuring Finance adds value; and
? Efficient and effective Transaction Processing
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3.2.1 A financial management framework that sets
the rules to achieve desired behaviours
Effective compliance within the financial management framework relies upon
providing timely, accurate, consistent, relevant and comparable financial
records that are kept and filed in accordance with accepted accounting
practices to satisfy the needs of all stakeholders, both internally and
externally.
The particular challenge for finance is securing influence over the front end
of payroll, payments and income processes since this is where risk
predominantly lies and these parts of the processes are usually outside the
direct control of finance. This challenge is further complicated where there
are multiple systems and variation in process. Influencing the front end of
processes is essential for two reasons:
? trust in the integrity of information; and
? control over pay and non-pay expenditure and income.
The CFO is accountable for financial management across the entire
organisation and requires assurance that effective systems of financial
control are in place. Assurance is provided by setting the rules, establishing
guidance and principles and monitoring compliance. Assurance means that
key stakeholders can rely upon the data for decision support.
Where compliance is robust, it tends to be underpinned by the following
culture and behaviours:
? Trust: On a personal level, individuals in the organisation must operate
with honesty and propriety. Senior staff should lead by example in
following procedures and by declaring any personal interests that might
conflict with their official duties.
? Integrity: An organisation’s integrity is derived from the standards of its
people and processes. It is imperative that people with the appropriate
skills and capabilities are in situ to ensure that predetermined standards
are met to provide assurance to the CFO.
? Accountability: An organisation must explain how it has used its
resources and what it has achieved as a result to all stakeholders and
has an operational, moral and legal duty to explain its decisions and
actions, and submit its financial reports to scrutiny.
? Consistency: An organisation's financial policies and systems must be
consistent over time. This promotes comparability, efficient operations
and transparency, especially in financial reporting. Inconsistent
approaches can be a sign that the financial situation is being
manipulated.
? Timeliness: An organisation must ensure the timely production of its
financial reports so that action, when required, can be taken close to the
event. Information losses its relevance the further away it is from the time
period it refers to.
? Accounting standards: The system for keeping financial records and
documentation must observe internationally accepted accounting
standards and principles. Any accountant from anywhere around the
world should be able to understand the organisation’s system for keeping
financial records.
? Sustainability: Expenditure must be kept in balance with incoming
funds, both at the operational and the strategic levels. Viability is a
measure of the providers’ financial stability. Management should prepare
a financing strategy to show how it will meet its financial obligations.
? Acceptance: compliance framework accepted across the organisation.
Regulation ranges from light touch to prescriptive. A prescriptive approach
should be taken where there is variable financial management maturity
across the organisation. This means that the CFO will specify rules and
regulations, systems and controls, and the risk management / intervention
process. This could include the following:
? Rules and regulations covering scheme of delegation, reporting formats,
operational protocols, standard chart of accounts, procurement codes;
? Risk management: working capital KPIs (key performance indicators),
integrity of balances;
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? Rules embedded in systems to prevent override and manipulation;
? Mandatory compliance training, including online training;
? Sanctions for non-compliance, including no response to formal
recommendations; and
? Advice: online access to regulations through a governance web site,
single point of contact for technical guidance.
International experience also identifies the need for inspection to provide
assurance that there is compliance throughout the organisation. Inspection
models typically include the following components:
? Risk assessment: operating units will have a varying risk profile, for
example reflecting scale and dependency. Arguably, operating units with
a higher risk profile would receive a more focused inspection regime’;
? Monitoring: routine performance management, supported by analysis is
the basis for assessing financial risk. Typically, a performance
management framework sets out the financial information that will be
captured monthly. Monitoring also includes exception reporting e.g. of
taxation issues. A dashboard of key information that highlights
exceptions / areas of concern is produced;
? Investigation: where monitoring highlights areas of concern, further
analysis is undertaken to confirm whether there is an issue, the scale
and impact of the issue and to propose regulatory action; and
? Action: where investigation identifies an issue to be addressed, action
ranges from support to the local team through to administration.
3.2.2 Ensuring Finance adds value
Decision support is concerned with providing financial advice to both internal
and external stakeholders to enable them to address policy and service
delivery challenges (both tactical and strategic). The advice is based upon
deep analytical capability, horizon scanning and scenario planning to
provide evidence-based and insightful analysis to support decision making.
Critical to decision support is the leading practice principle of business
partnering. The CIMA report Mastering Finance Business Partnering states
that ‘Finance Business Partnering’ is increasingly viewed as the most
effective way for in-house finance teams to add value’. Appendix D contains
selected case studies of organisations that have implemented finance
business partnering.
Operational Business partners are embedded in the business, often with a
matrix reporting structure such as a full line to the CFO and a dotted line to
the business manager or vice versa.
They have a professional responsibility to ensure that the organisation is
compliant with its reporting and control responsibilities and support
operational financial management and reporting, service line reporting.
Strategic business partners support strategic decision making and challenge
business managers to improve performance. Evidence from PA experience,
published case studies and academic research is that business partners act
as trusted advisers at the side of senior operational managers.
“Within Deutsche Post DHL, the finance community
sees itself as the ‘navigators’ of the business. In fact,
there is an extensive set of training and coaching
available within our in house ‘Advanced Navigator’
program. There is a very clear split between financial
accounting and controlling”
Pete Bandtock
DIRECTOR FINANCE BPO, DHL
Strategic business partners provide business leaders with information and
analysis about the organisations or function’s position and course,
contributing to strategic decision making and risk/performance management.
This means that these finance business partners are co-located with senior
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operational managers. These business partners need to be close enough to
operational managers to identify and understand the main areas of focus.
There is evidence that higher-performing organisations have finance teams
that influence all functional areas of the business.
“Balancing responsibilities to control and empower.
Finance business partnering is not so much a new role
as an extension or rebalancing of the finance
function’s traditional responsibilities so that finance is
not just an overhead but helps to create value’”
Toby Willson
FD, MICROSOFT UK
Finance business partners take a different approach from the conventional
finance team’s focus on historical numbers. Whilst the core finance function
continues to handle transaction processing, compliance and standard
reporting activities, the finance business partners look forward, providing
strategic insights.
Top quartile organisations have around 15% of finance WTE in business
partnering roles.
Trust is critical to the effectiveness of business partnering and is earned
through:
? Trust of information – the first step towards maturity is finance’s ability to
present impartial, accurate and timely information that the business
trusts;
? Trust of execution – finance needs to build on the first level of trust by
always following up on what it says it will do, and being proactive in its
advice; and
? Trust of judgement – this third stage takes time, as it depends on the
business partners’ track record of value-creating analysis and ideas.
Here, the business comes to recognise and value the finance business
partners’ grasp of how operational decisions deliver financial outcomes.
The business partner becomes the first person the business unit
manager calls to help guide decision making.
“The best business partners I have seen are able to
simplify complex situations so that line management
are able to grasp it, engage with it and understand the
consequences of different courses of action’”
Graham Colbert
VICE PRESIDENT OF FINANCE FOR ISMO, ASTRAZENECA’S INTERNATIONAL
SALES AND MARKETING ORGANISATION
The empirical evidence is that the effectiveness of finance business partners
strengthens as trust from operational managers develops and finance
matures (so that decision support is based upon reliable, relevant and timely
data). However, the evidence is also that organisations implement finance
business partners whilst addressing weaknesses in finance.
A finance business partner has a core skill set of finance and accounting
skills. Above this they have a combination of skills which on the one side are
about business understanding and strategic awareness and on the other,
how to influence people and even provide leadership. This requires a
passion for the business as well as the soft skill set. These skills are capped
with professional standards to provide integrity.
Implementation of finance business partners typically has the following
components:
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? Appointments follow developments in the operational organisation
structure;
? Tripartite agreement between senior operations manager, finance
business partner and CFO on areas of focus;
? Training and development programme to enhance the range of skills
required in a finance business partner, combining e-learning with
bespoke coaching and mentoring;
? Creating a community of interest to share experiences and highlighting
examples of success to build credibility, for example through an online
portal;
? Review of effectiveness through annual customer surveys completed by
both the finance business partners and their customers, scoring
performance against specific goals; and
? Rotation of finance business partners every 2-3 years to expand their
understanding of the business and to gain experience of working with
different management styles.
3.2.3 Efficient and effective Transaction Processing
The “engine room” needs to operate effectively if the Finance function is to
have credibility in the organisation. Leading practices in transaction
processing are concerned with the efficient processing of high volume,
repetitive and predictable activities. Efficient processing of transactions
depends upon the following principles:
? Single finance system;
? Single chart of accounts;
? Common procurement and HR codes;
? Standards and controls nationally defined and implemented;
? End-to-end management of processes, including integration with
Procurement and HR;
? Processes that are standardised, simplified and automated as far as
possible;
? Reduction of transaction volumes through rationalisation of suppliers,
consolidation of invoices and rationalisation of payrolls;
? Focus on continuous improvement, including benchmarking; and
? Resources with appropriate skills and capabilities: operational
excellence, change management, project management.
“The structure of the accounting and finance function is
changing. Increasingly both transaction processing and
analysis are being handled in a shared service model.
In this environment a finance person still re-working
numbers will be an additional overhead. Finance is
going to become a smaller exception-based advisory
group”
Roy Barden
THE HACKETT GROUP
Transaction processing can be delivered in house or outsourced. With
regards to outsourcing, a distinction can be made between processing and
supporting technology.
Shared services operate through service level agreements, which set out
both levels of performance for shared services (quality, timeliness and cost)
and expectations from customers (timeliness and accuracy).
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In the UK, NHS Shared Business Services (NHS SBS) is a joint venture
between the Department of Health and Steria, and leads the way in developing
and providing Finance & Accounting, Payroll, e-Procurement and Family Health
Services to all types of NHS organisations. Under this arrangement, Steria
provides IT business services whilst transaction processing is undertaken by
NHS staff. With over 1,200 people employed and in excess of 4.5 million
transactions processed per annum, NHS SBS works with over 30% of NHS
organisations to deliver operational efficiencies, cost savings and improved
service quality.
3.3 Requirements for change across the
finance operating model for health in
Ireland
In section 3.1 above we identified three drivers of change; consensus that
the current operating model is not fit for purpose; the need for improved
financial management accountability and control; and the changing
requirements due to the emerging healthcare landscape.
We also explored leading practice and the changing role of the finance
function with a particular focus on adding value through decision support.
The Working Group has endorsed this assessment.
The changes needed, and the drivers for those changes are summarised in
Table 5 below.
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Table 5: Changes required in financial management practices
Driver of change What needs to change
Transition from HSE to HCA
? Re-alignment of business partners from the current mainly regional structure to align with National
Directors and RDPIs
? Ability to report cash and expenditure by care group. Whilst budgets can be restructured by care
group, coding structures do not allow actual cash usage and expenditure to be reported by care
group. Further detail on the issues is contained in Appendix H
Relationship with Department of Health
? Ability to report cash and expenditure by care group. Whilst budgets can be restructured by care
group, coding structures do not allow actual cash usage and expenditure to be reported by care
group. Further detail on the issues is contained in Appendix H
Money Follow the Patient and UHI
? National Clinical Data Dictionary developed for Ireland to support consistency of data
? Default patient costing system defined
? Minimum standards of costing capability and use of costing information
? Community of interest for staff involved in PLC
? Budget allocation model based where relevant on tariffs
? Claims management system developed to initially meet requirements of the HCA and in the longer
term the requirements of insurers
? Auditing and inspection regime established, including access to individual patient records
? Develop analytical capability for MFTP budget modelling and policy scenario testing
Provider landscape
? As HSCP groups are formed, rationalisation of systems, processes and finance teams will naturally
happen. There is an opportunity to define and influence the strategic direction of these changes
through a mandated financial management framework
? Development of HSCP CFOs (or equivalent) and management accountants into operational financial
management business partners
Enablers (supporting building blocks that underpin
the above)
? Standardised and simplified processes
? Further automation of front end of processes, including deployment of self-service technology
? End-to-end management of processes, including integration with HR and Procurement
? Clearly defined and understood governance model, including reporting relationships with the CFO
? Rules embedded in systems where practicable
? Clear accountability arrangements for the new operational structure, including authority to intervene
where there is significant non-compliance
? Business intelligence, drawing upon multiple sources of data with deep analytical skills
? Financial system that is able to provide different views of financial information
? Standardisation of data, with System wide data standards
? Clear ownership of data - finance data should be owned by finance
? Performance management framework that includes sanctions
? Cultural change to strengthen recognition that financial management is a corporate responsibility and
sanctions for non-compliance
? Workforce development plan, including learning and development and career progression
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The future operating model must be able to achieve the following if it is to
fulfil the real opportunity that it is currently presented with:
? Commissioning and strategic planning support to National Directors;
? Performance management support to RDPIs;
? Operational financial management support to HSCP operational
managers;
? Capacity and capability to respond to new requirements such as MFTP;
? Flexible systems capable of supporting new requirements (and adaptable
to future requirements);
? Consistent data definitions and single point of data ownership;
? Standard processes that are simplified and automated as far as
practicable;
? Mandated financial management framework; and
? Auditing and inspection regime established.
To conclude however, the future operating model will only be able to deliver
these if the following components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and
facilitating effective self-service principles;
? Trusted financial management information which supports
effective decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance
management arrangements which reward good practices and
provide sanction where appropriate.
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Chapter 3 explored the reasons why financial
management practices within the Irish health system must
change and considered ways in which leading practice
principles could shape future ways of working. There are,
however, choices as to how key leading practice principles
should be adopted within the context of the Irish health
system. Workshop sessions facilitated the exploration and
appraisal of these options and the outcomes are explored
further in the paragraphs that follow.
4.1 Our approach to options appraisal
Workshops were held with the Working Group and process specialists to
consider and appraise the extent to which leading practice principles should
be applied in relation to:
? How best to achieve effective compliance and control, and the level of
prescription required to underpin the Financial Management Framework;
? the most appropriate way to deliver effective transaction processing; and
? the complexities in the Business partnering role and how to facilitate
accountability to the CFO without a direct line management relationship.
At each workshop:
? Options were described
? Evaluation criteria proposed
? Scoring mechanism proposed.
Workshop attendees then debated the options against the evaluation criteria
and scoring mechanism to reach a recommended solution. Appendix E
contains further detail in relation to the options appraisal undertaken, whilst
the key issues are discussed in the following sections.
4.2 Defining the Financial Management
Framework
Chapter 3 outlines the importance of an effective financial management
framework in providing assurance to the CFO in relation to financial
management practice across the system. The degree of prescription
required depends on the relative maturity of each organisation.
The leading practice principles underpinning robust financial management
were explored and the degree to which these were made a mandatory
requirement across the system was assessed. The elements considered
and options appraised are summarised in the adjacent table.
4 OPTIONS APPRAISAL
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Table 6: Delivery Options and Evaluation Criteria
Operating model
element
Delivery options Evaluation criteria
? Process (the way in
which the service is
undertaken)
? Governance and
controls (internal and
external regulations)
? Information (data
governance)
? Technology (supporting
systems)
? Skills of the finance
professionals in the
System
? Culture and behaviours
(compliance and
sanctions)
? Mandatory: all HSCPS
are required to comply
with standards defined
by CFO
? Recommended: all
HSCPS are encouraged
to comply with
standards defined by
CFO
? Guidance: all HSCPS
are to consider
standards defined by
CFO
? Alignment with design
principles
? Meets requirements of
Future Health
? Improves quality of
management
information
? Changes behaviours
? Releases resources for
value-added services
? Deliverability: capability,
capacity, affordability
and risk.
The detailed options appraisal is in Appendix E.
There was overwhelming consensus for the need for a high level of
prescription across the system, with the CFO mandating all aspects with the
exception of Culture and Behaviours, which due to its nature, could only be
recommended.
The recommendations are:
Aspect of Compliance Degree of prescription by
CFO
Process (the way in which the service is carried out) Mandatory
Governance and Controls (internal and external
regulations)
Mandatory
Information (data governance) Mandatory
Technology (supporting systems) Mandatory
Skills of finance professionals in the system Mandatory
Culture and Behaviours Recommended
4.3 Delivering effective transaction
processing
The importance of effective transaction processing to the overall
effectiveness of financial management was discussed and agreed. The HSE
is on a journey to transform transaction processing through a shared
services delivery model, and this has been given further impetus with the
creation of National Shared Services. As a result the CFO does not have
direct line management responsibility for the delivery of core finance
functions which are critical to, and underpin the effectiveness of overall
financial management practices.
The Working Group explored the delivery model options available to
consider the best way to ensure :
? finance can influence the end to end transaction process, and that these
are standardised and consistently adhered to;
? effective information management and data governance; and
? the delivery of a single financial system in the most efficient and cost
effective way.
The detailed options appraisal is contained in Appendix E.
The recommendations are:
Operating model component Preferred Provider /
Owner
Data Governance CFO
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Transaction Processing National Shared
Services
Technology to support transaction processing and
financial reporting
Managed
Service
provider
? It was considered that this approach would provide the optimum solution
in terms of cost, flexibility and future proofing in an unknown
environment;
? In addition it was concluded that strong governance between Finance
and National Shared Services is essential to support system
implementation and process transformation, through a combination of
reporting relationships and service level agreements; and
? The introduction of a client / contractor split would be essential to
manage operational delivery arrangements.
4.4 Addressing line management and
accountability in Business Partnering
Leading practice principles stress the importance of ensuring that Finance
adds value through its role in shaping strategic and operational decision
making through the provision of financial advice and support. The concept of
Business partnering was introduced as an effective model to support this
process.
The Working Group explored the relative strengths and weaknesses of
deploying a business partnering model which involved three distinct roles:
? Commissioning Business Partners, who support National Directors in
their responsibilities;
? Performance Business Partners, who work with the Chief Operating
Officer (COO) and RDPIs in supporting the planning and performance
management process; and
? Operational Business Partners who are responsible for financial
management support within HSCPs.
The nature of Business Partnering is such that it requires dual reporting
lines to enable:
? Accountability to the ‘customer’ to be a trusted adviser and to provide
the highest standards of professional advice and support to inform
decision making; and
? Accountability to the CFO to adhere to and enforce appropriate systems
of financial management and control, and to maintain professional
standards, codes of practice and ethics.
In these circumstances, matrix reporting lines are established. To be
effective, these require clarity in terms of respective responsibilities and
accountabilities, a means of agreeing performance standards and an
approach to address poor performance where a line management
relationship does not exist.
It has been concluded that a direct line reporting arrangement between the
CFO and the Finance Director (FD) of an HSCP is not appropriate due to:
? Complexities within the HSCP environment arising from the diverse
governance and reporting arrangements in place; and
? SFT’s view that that line management of finance staff within providers
may result in a lack of ownership for operational financial management
amongst clinicians and service managers.
It is envisaged that staff in HSCPs will have a professional accountability to
the CFO as head of profession and the CFO will play a role in ensuring the
quality of financial management provided across the system.
However, FDs in HSCPs must directly report to the CFO in respect of the
introduction of any new financial management framework, systems,
processes, structures, and any costing and service line management
arrangements.
This can be achieved by managing that change as part of an overall
programme, where the CFO is the SRO and the FD is responsible for local
project delivery.
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4.5 Conclusion and recommended way
forward
In shaping the new operating model the following principles should apply:
Mandatory financial
management framework to
apply across the health
system
? Use of a single financial management
system (covering Finance, HR and
procurement)
? Provision and management of the system to
be outsourced
? Information and data governance to be
owned by the CFO enabling a common chart
of accounts and data standards to be
consistently applied System wide
? Information to be collected once and used
many times with financial reporting and data
analytics being delivered in a standardised,
consistent way to all users through
operations excellence
? Governance and controls (internal and
external regulations) and the use of standard
processes and the way in which services are
delivered
? Ownership of end to end transaction
processes resting with operations excellence
? Skills and capabilities for key finance roles
? CPD compulsory for all finance professionals
? Learning and development for both finance
professionals and non-financial managers to
be recommended and supported by the
CFO.
Facilitating leading practices
in transaction processing
? Data governance should be owned by
Finance
? Transaction processing should be delivered
through operations excellence
? Technology to support transaction
processing should be delivered through a
managed service.
? Strong governance between Finance and
National Shared Services required to
support system implementation and process
transformation, through combination of
reporting relationships and service level
agreements.
? Introduce client / contractor role to manage
delivery arrangements.
Addressing line management
and accountability for
financial management
? Finance staff within HSCPs will be
accountable to the CFO as head of
profession and will have a “dotted line”
reporting relationship in place.
? The implementation of any new financial
management framework, system, process or
structure will be part of the Finance Reform
Programme and will be owned by the CFO
? FDs in HSCP will project manage
implementation within their area of
responsibility, reporting to the CFO through
the head of Operational Business Partnering
? Once financial management arrangements
are embedded and operating effectively,
“earned autonomy” will be deemed to be in
place and the relationship to the CFO will be
one of professional accountability.”
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The new Finance operating model for Health in Ireland
represents a fundamental change in financial management
practice and will enable Finance to deliver valued,
responsive and effective services in line with the system’s
changing needs. The CFO will:
? Define the financial management framework to be
followed;
? Provide trusted and timely information to support
decision making, in a standard and consistent way;
? Inform strategic and operational decision making
through trusted professional advice, insightful analysis
and decision support; and
? Ensure expected standards are maintained through
effective compliance and performance management.
The model is underpinned by a commitment to develop the
financial management capability of both finance staff and
budget holders to build a cost-consciousness culture and
change behaviours across the system.
5.1 Purpose
The operating model for financial management across the Irish health
system is designed to support the CFO in discharging his professional
accountability for financial management across the System and his
responsibility for establishing appropriate systems for financial control. It
draws on aspects of leading practice principles where appropriate and will
deliver a flexible, responsive financial management approach to meet the
changing demands of the system.
5.2 Vision and Design Principles
The Vision for Finance sets the context for the new Finance operating
model:
Finance will deliver valued, responsive and efficient services and adapt to the
Irish health system’s changing business needs. Finance will encourage
excellence, seek innovative solutions, take calculated judgements and work in
partnership with those who can help it achieve its goals. Finance will respond to
change and use it to release the potential in its people to really make a
difference.
5 NEW FINANCE OPERATING MODEL
FOR HEALTH IN IRELAND
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This aspiration will be underpinned by the following design principles which
set the framework for the detailed design:
? We have Trust in information, execution and judgement;
? Our flexible and resilient operating model is underpinned by finance
processes which are simple, standardised, understood, owned and
applied consistently;
? We focus on continuous improvement, delivering services our customers
need in the most effective way;
? Information is collected once and used many times;
? Self-service is common-place, bringing new responsibilities for all and a
renewed sense of ownership; as an employee, as a budget holder and
as a financial manager;
? We expect compliance to core processes and agreed performance
standards and the consequences are known and understood; and
? We recognise that our staff will make the new operating model for
finance a reality and we will make best use of their talents, skills,
knowledge and expertise.
5.3 A new Finance operating model
The new Finance operating model for Health in Ireland represents a
fundamental change in financial management practice and will enable
Finance to deliver valued, responsive and effective services in line with the
system’s changing needs
This approach is well established in finance functions in major organisations
across both the public and private sector, and its appropriateness for the
emerging health system in Ireland has been tested by considering the
characteristics of the services that finance provides. Further detail is
provided in Appendix F
Figure 11 outlines the key characteristics of the new Finance operating
model and these are discussed in more detail in the sections that follow.
“I would expect to see three facets in the modern and
efficient finance function: a strong specialist finance
function covering tax, treasury, corporate finance,
statutory reporting and central planning and analysis;
a central centre of excellence for transaction
procession to ensure accounting processes operate in
a consistent and cost effective way throughout the
group; and a business partnering function”.
ADRIAN MARSH, DIRECTOR OF GROUP TAX, TREASURY AND CORPORATE
FINANCE, TESCO PLC.
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Figure 11 The new operating model for Finance
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5.3.1 Customers
An appropriate level of service will be agreed with all organisational entities
across the system, ensuring a level of support which is commensurate with
the specific requirements of that entity, using a risk based framework to
assess need.
The CFO will prescribe the financial management arrangements appropriate
for each part of the system and will ensure that these are supported
effectively.
The quality of services provided to customers will be monitored and subject
to continuous review.
The customers in amber within figure 10 will have a more arms-length
relationship with the CFO than others supported, given the nature of the
entities concerned.
What this will mean in practice:
? Consistent levels of service;
? Consistent service quality and responsive services;
? CFO can give assurance that financial management is properly supported
across the system; and
? Budget holders will be supported in making strategic and operational
decisions which are informed by financial implications.
5.3.2 Service Delivery Model
There will be three distinct functions supporting service delivery in the new
finance operating model
? Operations Excellence:
? Finance Specialists; and
? Business Partners
The characteristics are illustrated in Figure 12 and explored in more detail in
the following paragraphs.
Figure 12: The New Service Delivery Model
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Operations Excellence:
Operations Excellence is the ‘finance engine room’ which will ensure that
the infrastructure is in place to deliver financial reporting and transaction
processing effectively and efficiently.
Operations Excellence will ensure that Finance Specialists and Business
Partners are equipped with the core financial information they need to do
their jobs well, and to add value to the business.
The ‘engine room’ will put in place processes, systems and controls to
deliver:
? Line of sight
? Single version of the truth
? Trust in data
? Effective transaction processing
? Assurance that financial management is supported across the system
? Assurance in relation to service quality and standards.
We envisage that operations excellence would include the following service
components:
Service Component Description
Service Management Service Strategy &
Development
Engaging with users to
identify new requirements
and defining how
operations excellence
services will support these
new requirements.
Planning future
development activity on
behalf of the CFO
Process Ownership Designing all processes to
support Finance activities
and ensuring they are
deployed in line with
requirements.
Approves all process
changes and variations
from standard.
Professional Standards Defining expected
professional standards
and ensuring processes
are in place to support
achievement of these
standards
Service Design and
Quality Assurance
Designing services and
ensuring alignment with
standard processes and
operational service
delivery
Supplier relationship
management
Managing Operations
Excellence Service
Delivery quality and
standards. Managing
relationship with national
shard services and
managed services
providers
Development and
management of service
level agreements
Service Delivery Business Intelligence Operations Excellence
providing management
information and data
analytics service to all
users across the system
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to support Budget Holders
and Business Partners
Financial Accounting and
Management Accounting
Shared Service
(Including Treasury, Vote
and Capital Accounting)
Providing routine
accounting services in a
consistent and
standardised way to
support Budget Holders
and Business Partners
Transaction Processing National Shared
Services providing an
Efficient and effective
transaction processing
service for all transaction
processing requirements
using defined standard
processes and integrated
financial management
systems
Financial Systems Managed Service
providing integrated
financial management
systems will Provision of
integrated financial
management system.
There is a clear distinction between Service Management and Service
Delivery. The CFO owns all aspects of Operations Excellence and will
define service standards, quality and own standard processes. The CFO
may, however choose to use other organisations to deliver aspects of the
services and will manage the delivery of services against agreed standards
through contractual arrangements with external suppliers and service level
agreements with other entities such as National Shared Services.
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What this will mean in practice:
? Defined standards and quality of service
? Standard processes deployed consistently across the system
? Service delivery being supported by those best placed to do so
? Defined professional standards and investment in skills to develop these
standards
? Centres of excellence to support routine standard accounting and reporting
functions to delivery consistent standards of service; and
? Ability to manage service quality through contractual relationships with
suppliers.
Finance Specialists:
The concept of finance specialists is well established in HSE – teams of
experts currently provide advice in areas such as taxation, external financial
reporting, treasury and corporate budgeting.
The new operating model proposes the strengthening of this capability,
improving the way it is delivered by centralising expertise and improving the
way in which advice and guidance is shared amongst the system.
Finance Specialists will provide deep technical skills and expertise providing
a single point of contact for expert advice. Services will be provided in-house
where appropriate, and will draw on the best advice available from the
professional services marketplace to ensure the right advice is provided.
Finance specialists will provide the following services:
? Financial strategy and planning;
? Corporate budgeting;
? Corporate financial management and reporting;
? Value for money;
? Governance and controls; including data governance
? Financial risk management and insurance; and
? Taxation.
What this means in practice:
? Centres of excellence providing expert advice;
? Consistent standard and quality of advice;
? Greater investment in skills and capability of team;
? Improved access to specialist services;
? More proactive role in decision making rather than reacting to issues arising;
? Reduced validation and manipulation of data through data standardisation;
? Simpler consolidation of financial information through fewer systems;
? Clearer line of sight as systems are rationalised; and
? Stronger control through rules embedded in systems and automated
exception reporting.
Business Partners:
Business Partnering will provide all decision support activity across the
system and will form the majority of WTE effort. The function will support
the CFOs responsibility to improve financial management decision making
and promote a culture of financial responsibility across the system. This
decision support will be forward looking in the main. Decision support is
concerned with providing financial advice to both internal and external
stakeholders to enable them to address policy and service delivery
challenges (both tactical and strategic). The advice is based upon deep
analytical capability, horizon scanning and scenario planning to provide
evidence-based and insightful analysis to support decision making.
Decision support will include the following services:
? Decision support for strategy and commissioning;
? Decision support to performance management; and
? The professional leadership of operational decision support.
There will be three distinct Business Partnering roles as per figure 13 below:
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Figure 13: Business Partnering Roles
The Performance Management Business Partner will be part of the
Planning and Performance team and be aligned with the RDPI structure.
Performance management arrangements will ensure that financial control is
maintained within a system which has earned autonomy.
The performance management business partners will support the RDPI in
the planning and performance management process, as part of a multi-
disciplinary Planning & Performance team. The performance management
business partners will receive a regional view of care group data from
Operations Excellence (as the provider of routine management information)
and holds reviews with the HSCPs in their region. These meetings will
enable the finance business partners to provide monitoring and evaluation
reports for their area overall and for each care group. The National
Directors’ finance business partners will draw upon these monitoring and
evaluation reports for major, escalated issues.
The Commissioning Business Partner will be the face of finance for the
National Directors and will be part of the National Director team. Their focus
is forward looking, engaging with business intelligence (a multi-disciplined
team of analysts), finance specialists and operations to develop scenario
plans and business cases.
The Operational Business Partners are the Finance Directors of the
HSCPs. They provide financial management support and are responsible for
all financial management within their organisation. Reporting to the CEO,
they are a key member of the HSCP management team.
HSCP Finance Directors will have professional accountability to the CFO
and will be required to operate within the terms of the financial management
framework.
Business Partners will receive Business Intelligence and routine
management and accounting support from Operations Excellence. This will
allow them to spend time interpreting the information and analysing results,
and then working in partnership with the business to solve business
challenges rather than preparing the core information requirements.
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High Level Organisation Structure
The service delivery model reflects the requirements of the new health
system and will be supported by the following high level organisation
structure:
Figure 14: Organisation Structure
5.3.3 Process, Governance and Controls
An effective financial management framework is required to provide
assurance to the CFO in relation to financial management practice across
the system.
Processes will be streamlined, simplified standardised and automated.
These changes will be underpinned by a single integrated financial
management system providing a clear line of sight. This will limit variation
and provide a consistent approach to most finance actions which in turn will
lead to a significant reduction in the required resources to carry out these
processes. This will facilitate the ownership of end to end processes within
finance and these freed up resources will then be allocated elsewhere.
The CFO will mandate all aspects of governance and controls. All HSCPS
are must comply with standards defined by CFO.
Embedded rules across the entire system will help alignment it with the
design principles effectively.
What this will mean in practice:
? Processes supporting financial management will be defined by the CFO and
deployed consistently across the system
? Adherence to governance and controls will be mandated; and
? Controls will be systems driven wherever possible making compliance simple
? A risk based approach will be deployed which is light touch and focused on
key areas of concern..
5.3.4 Information and technology
A single integrated financial management system will reduce the existing
complexity and eradicate the use of multiple systems. It will support the use
of tools such as business intelligence, patient level costing and excel to
radically improve the ways of working. It will be characterised by a standard
chart of accounts, consistent data definitions and standardised reporting.
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This will result in the production of timely, reliable management information
on which to base informed financial decision making.
The characteristics are as follows:
Data Governance
? Data ownership is clearly defined and data is respected as a corporate
asset;
? A common chart of accounts will be in place;
? A data dictionary will be created so that definitions are consistent;
? Coding structures developed for core feeder systems will be aligned and
integrated; and
? Standard reports for management accounting purposes will be
prescribed.
Financial Systems
? Period end closure will be automatic and timely;
? Month end reports will be circulated to budget holders very soon after
period close;
? Finance, HR and Procurement will all be integrated;
? Statutory and voluntary providers will operate on the one system which
will eliminate consolidation;
? Financial management practices will improve significantly due to the
embedded system based rules and controls.and the line of sight
provided by the single integrated system.; and
? Patient level costing will support service line reporting and operational
budgetary control.
What this will mean in practice:
? A single financial management system supporting HR, Procurement and
Finance processes will be deployed across the health system;
? Information and data governance to be owned by CFO;
? Single version of the truth;
? Trust in data; and
? Information to be collected once and used many times with financial reporting
and data analytics being delivered in a standardised, consistent way to all
users through Operations Excellence.
5.3.5 Skills and capability and culture and
behaviours
Skills and capabilities for specific roles will be defined and staff will be
supported to ensure that they have the right skills and capabilities to carry
out their role effectively. The following actions will be instigated in order to
achieve greater alignment between the actual and the desired skills and
capabilities within the system:
? A workforce development plan will identify the specific requirements
across the system;
? System-wide financial management awareness will be created by the
provision and completion of course by both finance and non-finance staff.
Budget holders and service managers will be trained and supported in
financial management, but will be expected to take ownership of their
budget and their performance will be assessed accordingly;
? A compulsory Continuous Professional Development (CPD) programme
supported by learning and development plans will be enacted;
? Defined skills and capabilities for senior roles will be established; and
? A programme of performance management will be created supporting
desired behaviours. This will reward positive behaviours but will also
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have the support of the CFO to take action when undesirable behaviours
are discovered.
Perhaps the greatest challenge being faced is in changing culture and
behaviours across the health system. The effective implementation of these
actions will drive change in existing behaviours.
What this will mean in practice:
? Skills and capabilities mandated for key finance roles;
? CPD compulsory for all finance professionals; and
? Learning and development for both finance professionals and non-financial
managers to be recommended and supported by CFO.
5.3.6 Conclusion
This operating model represents a fundamental change from the existing
financial management practices. The work required to achieve it should not
be underestimated. The following chapter explores the strategy for
implementation..
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The scope and scale of change required to implement a
new operating model for financial management across a
changing health system should not be underestimated.
Consequently, a phased approach to implementation
which recognises both the changing environment and the
need to maintain business continuity in such a critical area
as financial management is key.
In this chapter we describe the steps required to support
the transition from the current way of working to a fully
reformed finance operating model and the implementation
steps required to deliver a successful outcome.
6.1 Essential components of the new
operating model
The future operating model for Finance is only achievable if the following
components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and facilitating
effective self-service principles;
? Trusted financial management information which supports effective
decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance management
arrangements which reward good practices and provide sanction where
appropriate.
The Finance Reform programme will deliver these components over time,
but there is a need for interim changes to the financial management
operating model to support the system during this transition period,
delivering the reform programme whilst ensuring that systems of financial
control remain robust and effective during transition.
This is particularly important given:
? Many commissioned reports, including the C & AG Audit report that the
current financial systems are not fit for purpose;
? The recent establishment of ‘National Directors’ and the immediate
necessity to prepare financial systems to deliver on their requirements;
and
? The overall transition, in the next few months, from the current reporting
structures and the need for continuity of financial reporting through this
change, while ensuring financial integrity.
6 IMPLEMENTATION STRATEGY
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6.2 An incremental approach to change
To ensure that the changes envisaged as part of this complex change
programme are implemented whilst ensuring business continuity, a two
stage interim operating model will be put in place for a period of up to 3
years. The approach is illustrated in figure 15 below, and the key aspects of
the approach explored in more detail in the following paragraphs.
Figure 15 The transition steps towards a future operating model
6.3 Step 1: An interim organisational
structure
As a first step towards reform, an interim organisational structure will be
established with effect from 1
st
October 2013, and will be operational until
such time as the following conditions are achieved:
? ISA review outcome is known;
? Interim BI reporting solution in place;
? New system requirements defined; and
? The future role of Shared Services confirmed.
The proposed high level organisation structure is presented below.
Figure 16 The interim organisational structure
Given the degree of uncertainty with regard to the future shape of the
provider landscape, coupled with a need to support the new structures whilst
maintaining stability and financial probity within existing operational
arrangements, the Business Partner will be introduced incrementally, with
the first step being to consolidate existing regional financial management
into an effective East Coats and West Coast / South split.
It is anticipated that this interim arrangement will be in place for a period of
between 6 to 9 months at most.
6.4 Step 2: A transitional operating model
In this section, we describe the key elements of the transitional operating
model, outlining the key change initiatives required to deliver the new
operating model over time, and how that change will be supported whilst
ensuring financial probity and reporting requirements continue to be
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supported during the transition. Figure 17 summarises the key transition
projects required to support the changes required to each of the component
parts of the new operating model, and these are explored in detail in the
sections that follow.
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Figure 17 The transitional operating model for Finance
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6.4.1 Customers
The Emerging HCA:
As the new structures evolve, financial management arrangements will
require to be introduced to support this. There is an immediate need to
support the National Directors in their new role, and in providing the
resources, management information and support to the Regional Directors
of Performance and Integration (RDPIs) in supporting planning and
performance management activity.
National Services:
There is inconsistency of support across National Services, and this has
been recognised recently with the secondment of an Assistant National
Director of Finance to PCRS. During the transition to the new operating
model the provision of financial management support to other National
Services will be reviewed, and resources deployed based on relative need,
taking into account the complexity and financial management challenges of
the service concerned, the extent of change to be supported and the
financial risk to the system as a whole.
The Department for Health:
Links with the Department will continue to be supported and will become a
key area of focus during the transition as the vote is transferred.
The Department for Children and Youth Affairs:
DCYS will continue to be supported during the transition period and beyond.
6.4.2 Service Delivery Model
The Transitional Service Delivery Model will be introduced over time, and
will build on the elements already in place, and provide additional support to
the emerging organisations as the transition progresses. It will provide the
infrastructure to address the immediate priorities for improvements in
financial management practices essential in the short term, support the
longer term reform agenda and continue to address the financial
management challenges of current operations.
The following interim structure will support the service delivery model, and
roles and responsibilities are outlined in the table that follows.
Figure 18 Transitional Management Structure
These are key leadership roles within Finance and those in these posts will
have clear responsibilities for both service delivery and reform. They will
have a clear change leadership role, and will need supported and developed
to deliver that role effectively.
The key roles and responsibilities of each post are in the table that follows.
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Table 7: Roles and Responsibilities within the Transitional Operating Model
Role
Responsibilities
Finance Reform Lead
Office of the CFO ? Providing support to the CFO to enable the discharge of his accountability for financial
management across the system.
? Support to the CFO in engaging with the wider reform agenda
? Support to the CFO in transitioning to his new role
? Support to the CFO in engaging with key stakeholders and the political system,
including reporting to DH, DPER and Cabinet and engagement more broadly.
? Finance Reform PMO
Head of Business
Partnering (Operations)
? Programme management of transition projects to introduce effective financial
management arrangements in HSCPs
? Professional leadership of Hospital Group / ISA Finance Directors
? Liaison with wider finance family as required
? Hospital Group formation
? ISA review
? MFTP: operational implications
Head of Business
Partnering
(Commissioning &
Performance)
? Provision of Business Partnering support to National Directors to support their strategic
role as Care Group budget holder, and to support commissioning and service
improvement objectives
? Provision of Business Partnering support to the COO and Regional Directors of
Performance and Integration to support the planning and performance management
arrangements of the organisation.
? Standardised and simplified processes for
business partnering
? Design and development of dashboard based
exception reporting
? Design of engagement model with customers and
other aspects of finance
Head of Finance
Specialists
? Managing the provision of specialist finance services across the system (Tax,
Insurance and Risk Management, Corporate Budgeting)
? Building the capability in financial strategy and planning
? Relationship management with Department of Health(excluding Vote & Treasury)
? Data governance and financial controls
? Engagement with other government departments
? Design of new financial management framework
? Data governance and controls
? MFTP: governance, controls, process, standards
? Resource allocation
? Commissioning infrastructure
Head of Operations
Excellence
? Process design and service standards
? Business Intelligence and Financial Reporting
? Financial Accounting( including Vote and Treasury)
? Management Accounting
? Shared Services development
? Transfer of Vote
? Establishment of Business Intelligence capability
? Establishment of Accounting Centre of Excellence
to support routine financial and management
accounting activities
? Ownership of the design of end to end processes
? Commissioning a new integrated financial
management system
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6.4.3 Process Governance and Controls
The transitional operating model will support the move to a mandatory
compliance regime supported by system based controls. Work can progress
in developing the financial control framework and in developing the
performance management framework to support it.
There is also a good opportunity to explore ways in which improvements in
transaction processing efficiency can be harnessed ahead of any system
implementation by simplifying contractual arrangements, consolidating pay
scales, payrolls and rationalising the supplier base.
Design and development of new end to end processes which minimise
variation from standard system templates, and support front-end automation
and self-service can also be progressed.
6.4.4 Information and Technology
There will be an immediate need to address reporting requirements to
support the new performance management arrangements, Care Group
reporting and the new hospital groups.
It is likely that a Business Intelligence led short term solution adopting Big
Data technology will provide the best option to address the transitional
reporting requirements. Big Data means taking large amounts of data from a
range of sources and using analytical tools to draw out business insights at
low cost. These solutions can be implemented rapidly and across disparate
systems. Appendix D contains case studies for Big Data.
Meanwhile the design and development of a single chart of accounts and
coding structures for procurement and HR will make a significant
contribution towards the final requirements for a single system.
Analysis by the Senior Finance Team (Appendix H refers) concluded that
the current business case for a new financial system does not meet the
future requirements of the system and will not deliver an optimum solution.
A business case for a managed service to provide an integrated HR,
procurement and finance system capable of meeting the future requirements
of the system should be progressed as a matter of urgency
In developing plans for the future in relation to Information and Technology it
is important to maintain a link with, and to involve the Strategic ICT Group
as part of this process. This will ensure that proposals fit with the developing
ICT strategy for the system and that requirements across the entirety of the
system are consistently defined and addressed effectively.
6.4.5 Skills, capabilities, culture and behaviours
The focus will be in addressing skills and capability gaps to prepare finance
staff and financial managers for their new roles.
There will be a significant workforce agenda, to design roles, appoint staff to
posts, and to support their learning and development.
At the same time, there is a need for significant engagement with the Budget
Holder community to set expectations and to provide support to them as a
culture of cost consciousness is developed.
6.4.6 A programme management approach to ensure
operational alignment with new operating
model design
The emerging health landscape and legacy challenges means that finance
will be embarking on a substantial and wide-ranging change programme.
There is therefore a transition period as finance moves from the current
situation to a new ‘business as usual’ operating model.
This transition period requires the definition of a programme of work which
will establish the financial management framework. Managing this change
will require a strong programme management approach to ensure that the
mandated requirements of the operating model are achieved, and that the
CFO can be assured that financial management arrangements are fit for
purpose within parts of the System over which he has no direct control.
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To facilitate this we recommend that the introduction of any new financial
management framework, systems, processes, structures and supporting
service line management is managed as part of the Finance Reform
Programme, where the CFO is the Senior Responsible Officer (SRO).
Programme and Project management arrangements consistent with those
proposed to support overall System Reform will be put in place.
The HSCP FD will accountable to the CFO/SRO for project delivery,
consistent with the CFO’s role as head of profession. In practical terms this
responsibility will be carried out by the Head of Business Partnering
(Operations) on behalf of the CFO.
This ensures the CFO has the necessary control over how financial
management is set up and delivered, to ensure that the framework is
complied with, and through professional accountability, has the ability to
step in if standards slip, and more positively be able to provide
whistleblowing support / advice and support where they feel their
professional responsibilities around financial management are being
compromised.
6.5 Implementation success factors
Our engagement has identified four key implementation challenges which
must be addressed explicitly to ensure that the Finance Reform programme
can achieve a successful outcome. Tackling these issues will also go a long
way to securing the buy-in and commitment of key players across the
financial management community whose involvement is critical for success.
6.5.1 Demonstrating intent and ability to deliver
From discussions with the Senior Finance Team it is evident that the
financial management community wants to see evidence that change will
happen and there remains a degree of scepticism that there will be any real
change in the short to medium term arising from this work. This is largely
based on previous experience and in relation to the financial system
replacement in particular.
In reality there are a number of factors in play which provide the “perfect
storm” necessary to drive the changes necessary:
? Universal recognition of the need for change;
? Broader system wide reform introducing new requirements;
? Cross departmental senior leadership support and ownership, through
the Finance Reform Board;
? A commitment through the Memorandum of Understanding with the
Troika to deliver a new financial management system; and,
? The appointment of the CFO as the first step in driving changes in
financial management practices across the system.
These factors provide the conditions for change and require that the CFO
takes steps to demonstrate intent to the system as a whole. This can be
achieved in the following ways:
? Assuming professional responsibility for all staff with a substantive
finance role during the transition period. This would include staff currently
employed across the statutory and voluntary sector at present and is
intended to facilitate the scope and scale of change required across the
system.
? Providing a clear statement of intent in the extent of prescription required
in respect of the financial management framework to provide assurance
in respect of his accountability for system wide financial management.
? Making explicit the expectations placed on budget managers in the
context of financial management and providing an infrastructure to
support them in meeting these expectations.
? Providing clarity regarding the consequences of failing to meet
expectations in this respect; and ensuring that performance management
arrangements are in place, and to ensure that management responds
through action in addressing aspects of poor performance.
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6.5.2 Business Case and approvals
Securing business case approval for any significant investment is seen as a
barrier to change based on the experiences of recent years in seeking
approvals to proceed in respect of new financial system investment.
The need to demonstrate a case for investment is essential, and that case
must be expressed in the context of wider system reform and support the
requirements of the future health system, not just address the short term
challenges facing the statutory sector.
The commitment to the Troika reinforces the priority to be placed on this
exercise, and it is suggested that the business case for a new Integrated
Financial Management System (which should consider HR, Payroll,
Procurement, Income and general ledger requirements, and the requirement
to interface with patient level costing solutions) should be progressed as a
matter of urgency in consultation with CMOD (Centre for Management and
Organisation Development) (who should be asked to commit to a short
timeframe for approvals) and with the support of the Systems Reform Unit.
As a key enabler of the new operating model for financial management in
Health, the case for investment in a new system should not be considered in
isolation, rather needs to support the overall shift in resources required away
from transaction processing into decision support essential to delivering the
desired financial management practices required. As such it should form
part of a wider business case to support investment in the overall Finance
Reform programme.
6.5.3 Workforce issues
The success of the new operating model depends on the ability of the
system to:
? Undertake a significant role design exercise and to appoint staff to new
roles in an appropriate, transparent manner, ensuring that the roles are
resourced with individuals with the right skills and capabilities to carry out
the role effectively.
? Redeploy resources across the system to facilitate the transfer of effort
from transaction processing to decision support. This may involve
changes in location and in job function.
? Ensure that there is a succession plan in place to develop future finance
technical specialists, business partners and leaders and to ensure
effective knowledge transfer arrangements are in place.
Given the extent of the workforce issues to address it is recommended that
dedicated HR resources are provided to support the Finance Reform
programme.
6.5.4 Resourcing the programme
The business or business requirements are best defined by those working in
that business; it is critical for the success of the programme that the next
phase of work is owned by the CFO and that key players from across the
financial management community play a key role in delivering the
programme of work required.
This highlights a number of challenges which need to be overcome:
? Staff supporting financial management across the system are under
pressure with existing workloads. Adding to that pressure would be
counter-productive.
? There needs to be a continued focus on the business of financial
management during the transition, and key individuals likely to be
required to support any change programme are also likely to be critical to
the success of business as usual.
? It is likely that delivering the programme effectively wil require a
combined team of HSE staff supported by external consultancy support.
This will require investment over an 18 month to 2 year period to meet
the cost of external consultancy and to provide cover for key individuals
currently supporting core business as usual functions whilst they are
seconded to the programme team.
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6.6 Implementation plan
This section outlines the implementation plan to deliver the programme of
work required, providing clarity in respect of the scope and scale of change
required and the wider milestones driving the pace of change.
6.6.1 Key milestones driving the pace of change:
The diagram below highlights the current view of the key milestones from
the wider System Reform programme which drive the pace of change
required for Finance Reform.
6.6.2 High level programme roadmap
There are four key workstreams to the programme going forward:
? Programme Management: to ensure that all aspects of the programme
deliver as planned, and that risks and issues are tracked and managed
and mitigated, dependencies known and understood;
? Supporting Interim Arrangements: tactical projects to address
immediate new requirements and weaknesses in current financial
management practices prior to the move to the transition period;
? Supporting Wider Finance Reform: projects with a core finance
component which form the basis of the Finance pillar of System Reform;
and
? Delivering the new Finance Operating Model: key projects to deliver
the longer term model for financial management for a new health system.
A high level programme roadmap is presented below, and the key activities,
resource requirements and dependencies are discussed in later sections.
2013 2014 2015 2016
UHI in place Hospital Trusts
established
MFTP Live Hospital Groups
f ormed
MFTP Shadow
Tarif f s
Community
Trusts
established ?
HCA f ormed Interim structure
in place
MFTP
inf rastructure
designed and
implemented
Vote
Transf erred
ISA Review NIPO
Established
2014 Service
Planning and
Budgeting
? Care groups
? Shadow Tarif fs
? Resource
Allocations
? Commissioning
Approach
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Figure 19 High level road map
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6.6.3 Programme Management
An appropriate programme management infrastructure with reporting links into the System Reform Unit is an essential component for success. The following
arrangements are recommended:
Task Group Key Activities Resource Requirements Dependencies
Programme
Management
? PMO
? Progress reporting
? Risk and issue management
? Resource deployment and management of
external consultancy support
? Benefits realisation
? Communications
? Programme Manager
? PMO support
? Access to external support as required to
supplement internal resources
? Access to HR / IT / Comms support as
required
? Alignment with and links to the system reform
unit
? Sufficient internal resources to manage and
deliver the projects within the programme
? Ability to prioritise and redirect resources
currently deployed on project management
activity, and which is not contributing to the
overall objectives of the programme.
6.6.4 Supporting Interim Arrangements
Task Group Key Activities Resource Requirements Dependencies
Planning and
Budgeting 2014
? Medium term financial outlook to inform
direction of travel
? Cost containment strategy to inform DH
discussions with DPER
? Resource allocation approach and link to
shadow tariff development
? Establishment of Care Group Budgets
? Contingency planning
? Internal project team
? Access to external support as required to
supplement internal resources
? Contributions from senior management
? Engagement with DH
? MFTP approach in respect of shadow tariffs
? Government spending plans over medium
term
Financial
Reporting: Interim
Arrangements
? Identify requirements to report on a cash and
income and expenditure basis by care group
? Identify approach to provide balance sheet for
each hospital group
? Identify approach to support MI requirements
of national Directors and RDPIs to support
planning and performance management
arrangements and dashboard reporting
? Identify approach to provide consolidated MI
across statutory and voluntary providers to
support hospital groups
? Consider whether CRS can deliver
? Project manager
? Contributions from the following key business
areas:
? Corporate Budgeting and reporting
? Cash and Treasury
? Financial Accounting
? Management Accounting
? Business Partners supporting National
Directors / RDPIS / Operational
? BI / MI expertise
? Links with COMPSTAT
? Availability of financial information
? Suitability of CRS
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Task Group Key Activities Resource Requirements Dependencies
requirements or whether “Big Data” approach
is required
? Implement new reporting requirements
? Head of Planning & Performance Management
? Access to external resources to provide
leading practices in business intelligence and
to support the project
Process,
Governance and
Controls
? Consider an interim solution to support
requisition management aiding non-staff cost
control and compliance with national contracts
and frameworks
? Internal project team to be established
? Project manager
? Access to key staff from the following areas:
? Procurement
? Finance
? IT
? Access to external support to provide review
and challenge
? Work underway within Procurement
? Timeframes for roll-out of integrated financial
management system
6.6.5 Supporting Wider Finance Reform
Task Group Key Activities Resource Requirements Dependencies
Money Follows the
Patient
? Define process, governance and controls
? Establish infrastructure
? Patient Level Costing system design.
procurement and implementation
? Establish NIPO
? Tariff Setting
? Establishment of payment mechanism
? Link to budget allocations
? Design interfaces with policy setting and
? Establishment of payment mechanism
? Modelling impact of tariffs on commissioning
intentions
? Multi-disciplinary team with representation
from both the Department, the HSE as
commissioner and of provider organisations
? Finance
? IT
? Clinical / operational expertise
? Shared Services: to inform transaction
processing requirements and delivery
mechanisms
? Decision on provision of financial systems
? Decision on scope of payments element of
shared services
? Decision on role of NIPO
? Decision on scope of shadow tariff process
and wider resource allocation approach.
? Understand activity levels and forecast
demand to inform commissioning intensions
? Medium term strategic plan, both operational
and financial to inform commissioning
intentions and direction of travel
Hospital Group
Formation
? Understand impact of shadow tariffs on
potential funding levels and establish cost
reduction target to be achieved through
reconfiguration
? Support integration of hospital operations
across the group structures
? Implement new Financial Management
? Project teams from each group
? Operations support
? HR support
? Financial Management expertise to implement
service line reporting arrangements
? Shadow tariffs
? 2014 resource allocations
? Understanding of transition arrangements
towards financial stability
? Commissioning intensions from National
Director
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Task Group Key Activities Resource Requirements Dependencies
arrangements ? Visibility of financial and operational
management information across the group
structures
ISA Review ? Understand impact of shadow tariffs on
potential funding levels and establish cost
reduction target to be achieved through
reconfiguration
? Support integration of community
organisations across the new structures
? Implement new financial management
arrangements
? Project teams from each group
? Operations support
? HR support
? Financial Management expertise to implement
service line reporting arrangements
? Shadow tariffs and / or 2014 resource
allocations
? Understanding of transition arrangements
towards financial stability
? Commissioning intensions from National
Director
? Visibility of financial and operational
management information across the group
structures
6.6.6 Delivering a new operating model for Finance
Task Group Key Activities Resource Requirements Dependencies
Service Delivery
Model
? For each component of the service
delivery model (business partners,
specialist finance and operations
excellence, develop detailed design for
the:
? A) interim model;
? B) transitional model; and
? C) future operating model for finance..
This will involve:
? Detailed organisation structure
? Role description, job specifications,
person specifications
? Service standards
? Processes and procedures
? Implementation
? Appointments process
? New processes and procedures
? Skills and capability development
? HR to support workforce / IR issues
? Organisation design / finance leading practices
expertise
? Process specialists
? Pace of change dependent on wider
structural reform and will align to
establishment of new organisations
? Decision on financial system
? Timeframe for interim solutions?
? Decision on shared services strategy:
timeframe for consolidation of operations and
delivery of services to Hospital Groups and
ISAs from Shared Services
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Task Group Key Activities Resource Requirements Dependencies
Process, Governance
and Controls
? Design common standardised processes
with limited divergence from system
standards
? Focus on front – end of the process
which will impact on service operations
and develop approaches which will
remove manual processing, drive self-
service and interface with core
operational systems such as rostering to
improve operational efficiency
? Define system based control
requirements and specify requirements
? Develop infrastructure to support the
sharing of guidance and information
? Develop on-line and face to face training
to support budget holders
? Revise and Develop IMRs to reflect
revised processes and procedures
? Design and develop an approach for
exception reporting
? Implement common processes
? Launch guidance and support framework
? Support learning and skills development
? Process specialists
? IT / systems support
? Operational staff
? Internal audit
? Governance and controls
? Decision on core systems
? Clarity regarding function and form of new
organisations
? Interaction with other projects to implement
operational systems e.g. rostering systems to
drive automation
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Task Group Key Activities Resource Requirements Dependencies
New Financial System
? Identify critical requirements
? Detailed Design to include:
? Chart of Accounts
? Coding structures for HR, Procurement
and GL
? Data definitions
? Reporting requirements
? MFTP patient level costing
? Develop strategy to reduce the volumes
of transactions and complexity of grading
structures etc (payroll, AP and
procurement)
? Procurement of managed service:
? HR, Finance, Procurement, PLC. MI and
Business Intelligence
? System configuration
? System roll out
? Process specialists:
? HR
? Procurement
? Finance
? IT / systems support
? Financial Accountants
? Management Accountants
? Operational staff
? Internal audit
? Governance and controls specialists
? Decision on financial system investment
? MFTP system selection and approach to
costing
Skills and Capabilities
? Confirm desired skills and capabilities to
support the new service delivery model
? Confirm skills and capability gaps and
priority areas for development
? Develop learning and development
strategy and supporting materials for
both e-learning and classroom based
support
? Develop support to build the skills and
capabilities of Budget Holders and other
non-financial managers in financial
management
? Form and develop the wider Finance
Community and build communities of
practice to develop skills and capabilities
? Open Irish branch of HFMA to support
finance community and leverage the
infrastructure in place
? HR / Workforce development support
? Finance leading practices expertise
? Securing investment in skills and capability
development
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Task Group Key Activities Resource Requirements Dependencies
? Trainee Programme
? Selective recruitment to build capability
in key areas
Culture and
Behaviours
Both within Finance and across the
wider Health System
? Identify desired behaviours and how
success will be measured
? Identify key messages and actions which
will make an immediate impact and plan
their execution
? Support desired behaviour changes
through skills and capability development
? Incorporate measures within
performance management arrangements
? Demonstrate success and build
momentum
? Share outcomes and lessons learned
? Celebrate success
? Dedicated resources to support change
management as part of the programme
? Access to external support
? Support from Corporate Communications
? Nominated Change Champions to “walk the talk”
across the system
? Performance Management in place
? Investment in learning and development
? HFMA relationship developed
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6.7 Planned Outcomes: Year 1
Being seen to deliver against plan and to make incremental steps towards the desired end position in a manner which both builds momentum and secures
buy-in from both users of finance and those within the financial management community is essential for success.
Having clarity of purpose and a time-bound set of milestones to achieve is a key enabler of this, as is the adoption of a rigorous project management approach
to oversee programme delivery.
Planned outcomes, for the next twelve months, in quarterly intervals are shown below will assist in managing delivery. Communicating the successful
achievement of these goals is important to raise the profile of the programme and to celebrate the contribution made by the team to the overall objective.
Task Group Q4 2013
(Oct –Dec)
Q1 2014
(Jan-Mar)
Q2 2014
(Apr-Jun)
Q3 2014
(Jul-Sep)
Programme Management ? Phase 2 Plan agreed
? TOM Agreed
? Securing budget to resource
team to deliver programme
? Programme support in place
? Project roles resourced
? Key posts backfilled
? Progress reporting
? Risks and Issues
? Dependencies
? Benefits
? Skills transfer plan agreed
? Progress reporting
? Risks and Issues
? Dependencies
? Benefits
? Skills transfer underway
?
MFTP Delivery ? Team mobilised
? Approach agreed
? Shadow tariffs modelled
? Resource allocation strategy
developed
? Shadow tariffs in place
? Performance reporting
aligned with tariff approach
? Q1 review
? Assess tariffs and pricing
? Revision plan agreed
Hospital Group Delivery ? Programme management
arrangements in place
? Team mobilised
? Professional alignment of
Finance staff to CFO
? Transitional arrangements
planned
? Group financial reporting
arrangements in place
? SLM developed
? Shadow tariff regime / patient
level costing approach in
place.
? Shadow tariffs in place
? Performance reporting
aligned to tariff approach
? Q1 review
? Assess effectiveness of
financial management
arrangements
? Revision plan agreed
ISA Reform ? Team mobilised
? Approach agreed
? Group financial reporting
arrangements in place
? Q1 review
? Assess effectiveness of
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Task Group Q4 2013
(Oct –Dec)
Q1 2014
(Jan-Mar)
Q2 2014
(Apr-Jun)
Q3 2014
(Jul-Sep)
? Finance staff aligned to CFO
? Transition arrangements
planned and agreed
? SLM developed to support
financial management and
control
financial management
arrangements
? Revision plan agreed
UHI Implementation ? Team mobilised
? Approach agreed
? Design work underway
2014 Planning & Budgeting ? Three year financial strategy
developed
? Cost of Reform developed
? Cost Containment Strategy
agreed
? Resource Allocations by
Care Group
? Shadow Tariffs
? Agree service plans in line
with revised management
arrangements
Interim Reporting ? Team mobilised
? Approach agreed
? Appraisal of options for
reporting
? Big data implementation
? Reports designed and tested
? New reporting in place
Future Systems ? Confirmation of strategy
? Business Case for managed
service for HR, procurement
and finance system approved
? PIN notice issued
? Critical requirements
identified
? Chart of Accounts and HR,
Payroll and Procurement
coding structures designed
? System Design continues
? Procurement underway
? Supplier negotiations
? Preferred supplier identified
? Contractual negotiations
? Contract concluded
? Configurations underway
? Roll-out to commence
Service Delivery Model ? Interim Heads of Function
roles in place
? Appointments to Business
Partner roles
? Appointment to Finance
Specialists roles
? Roll out to commence
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CONFIDENTIAL – between PA and The Health Service Executive
Task Group Q4 2013
(Oct –Dec)
Q1 2014
(Jan-Mar)
Q2 2014
(Apr-Jun)
Q3 2014
(Jul-Sep)
? Relationship and way of
working with National Shared
Services agreed.
? Detailed design completed
? Job roles and person
specifications developed
? Appointment to Finance
Reform roles
? Backfilling as required
? Appointment to Operations
Excellence roles
Process, Governance &
Controls
? Define data governance
arrangements
? Define controls framework
and approach
? Support process and Chart of
Accounts design activity
? Build BI capability
? Develop Accounting Centre
of Excellence
? Develop risk management
plan and governance
approach for Finance Reform
? Support suppliers
negotiations for new systems
? Advise on reporting ,
governance and controls
requirements
? Act as client for new system
implementation
? Act as client for process
redesign
Skills & Capabilities ? Skills and capabilities defined
? HFMA link agreed
? CPD plan in place
? Learning and Development
plan in place
? First cadre of Business
Partners trained
? First cadre of Budget Holder
training supported
? Review of Q1
? Agree plan for next 12
months
Culture & Behaviour ? CFO in post
? Engagement with key
stakeholders
? Communications with health
system to define
requirements for financial
management and share new
operating model proposals
? Performance management
expectations made clear
? Reward and sanction defined
? Communication and
engagement
? Business Partners in place
? Support to Budget Holders
provided
? Communication and
engagement
? Review of Q1
? Agree plan for next 12
months
? Communication and
engagement
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CONFIDENTIAL – between PA and The Health Service Executive
6.8 Critical Success Factors
In taking this initiative forward it is important to learn from others to ensure
that the programme is best placed to succeed. The critical success factors
and how these will be achieved are outlined in table 8.
The programme set out in this section is aimed at radically transforming the
overall financial management across Ireland’s health sector and
underpinning broader health reform in line with Government aspirations. The
overall plan identifies the need for significant and positive action in the
immediate months ahead and the success of the overall programme will
likely be defined by these actions.
Table 8: Critical Success Factors
Critical Success Factors How this will be achieved
Clarity of Vision
? As articulated within this document
through the high level design of the
Finance Operating Model
Strong Leadership
? Through the Finance Reform Board
and the sponsorship of the CFO
Capacity and capability to implement
the Vision
? Back-filling key roles to free up
capacity to support the programme
? Securing budget and investment to
address capability and capacity
gaps from external consultancy
support
Effective Project and Programme
Management
? Appointing a programme manager
from within the senior management
team
? Establishing a programme
management infrastructure
? Ensuring that the programme
remains properly resourced
Ownership within the business
? Involvement of key players from
financial management community
? Lead roles in delivery of key
projects
Effective communications and
sharing success
? Communications role within the
programme infrastructure
? Website to share information more
widely
? Events to celebrate success
Promoting an environment which
encourages innovation and a
considered approach to risk.
? Within the context of effective
project management and risk
management and mitigation in
place, encourage action and
recognise that a partial outcome is
better than none.
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CONFIDENTIAL – between PA and The Health Service Executive
A new Finance operating model is essential to support the
emerging financial management requirements of Future
Health and to provide confidence to key stakeholders that
the Health budget is being used wisely and well to deliver
quality, safe and sustainable services to patients. The new
model represents a fundamental change in financial
management practice and the extent of change required
should not be underestimated. Consequently, a phased
approach to implementation which recognises both the
changing environment and the need to maintain business
continuity in such a critical area as financial management
is key
Phase 2 of the Finance Reform Programme will radically transform financial
management across Ireland’s health sector and will underpin broader health
reform in line with Government aspirations.
The future operating model for Finance is only achievable if the following
components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and facilitating
effective self-service principles;
? Trusted financial management information which supports effective
decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance management
arrangements which reward good practices and provide sanction where
appropriate.
The Finance Reform programme will deliver these components over time,
but there is a need for interim changes to the financial management
operating model to support the system during this transition period,
delivering the reform programme whilst ensuring that systems of financial
control remain robust and effective during transition.
Our work to date has started the change journey by building real consensus
amongst the finance community. There is a shared understanding of the
need to change and a commitment to make that change happen.
A quarterly milestone plan to support the next twelve months has been
developed as part of a three year change programme. The plan identifies
the need for significant and positive action in the immediate months ahead
and the success of the overall programme will likely be defined by these
actions
This report recommends a new Operating Model for Finance and seeks
approval to progress with Phase 2 of the Finance Reform programme as
outlined in the Implementation Strategy with immediate effect.
7 CONCLUSIONS
91
CONFIDENTIAL – between PA and The Health Service Executive
A SHAPE OF FINANCE 92
A.1 Introduction 92
A.2 Process analysis 93
A.3 Duplication of process activities 94
A.4 Fragmentation 97
A.5 Activity profile of core processes 97
A.6 Cost Analysis 98
A.7 Grade Analysis 104
B TRAINING NEEDS ANALYSIS 111
B.1 Introduction 111
C EMERGING HOSPITAL GROUPS 115
C.1 Introduction 115
C.2 The emerging group structures 115
C.3 Steps towards a new operating model 116
C.4 Dublin East 117
C.5 South / South West Error! Bookmark not defined.
C.6 Dublin North East 119
C.7 Dublin Midlands 120
C.8 West / North West 121
C.9 Mid West 122
D CASE STUDIES 123
D.1 Business partnering 123
D.2 Shared services 126
D.3 Big Data 126
E OPTIONS APPRAISAL 129
E.1 Introduction 129
E.2 Compliance 129
E.3 Transaction processing 137
E.4 Business Partners 143
F ORGANISATION DESIGN 145
G BUSINESS INTELLIGENCE 148
H SENIOR FINANCE TEAM VIEW OF CURRENT
INFORMATION SYSTEMS 150
I KEY STAKEHOLDERS CONSULTED 151
APPENDICES
92
CONFIDENTIAL – between PA and The Health Service Executive
A.1 Introduction
The Shape of Finance survey was designed to capture the amount of whole
time equivalents (WTE) involved in finance processes. The combined
results allow an analysis of the proportionality of services – decision support,
compliance and transaction processing across finance in terms of time and
cost. The survey was completed by the relevant Assistant National Directors
of Finance, Finance Managers in statutory hospitals and community,
Finance Directors in voluntary acute hospitals and Finance/Administration
managers in voluntary community agencies on behalf of their teams.
The survey provides a high level structured view of the current service
delivery model for finance across the System. This highlights how resources
can be utilised more effectively. Leading practice trends free up resources
from transaction processing to enable investment primarily in decision
support but also compliance where necessary, and to reduce the overall
size of the finance team. This is achieved by further automation of
transaction processing, simplification and standardisation of processes and
embedding controls in systems.
Section A7.1 below contains a breakdown on the templates received and
included in the analysis. The survey was sent out on Monday, May 20th with
participants being requested to complete it by Friday, May 31st. The initial
response was poor and an extension was provided till Monday, June 17th.
Responses continued to come in till the date of this submission but those
received after Monday, June 24th have not been included.
Overall, responses received covered 1,628 staff (1,273.5 WTE). This
includes staff employed directly within National Finance, and those in local
finance functions in National Services, and in HSCPs from both the statutory
and voluntary sector.
? The estimated cost of headcount involved in finance processes is
€74m.
10
This cost is a ‘full cost basis’ comprising salary, salary on-
costs for PRSI and pensions, and overheads consumed (such
accommodation, technology and training) and equates to 0.55% of
total HSE expenditure of €13.68bn. This figure only relates to the
templates returned so the actual figure is higher.
In total 136 template returns were included in the analysis:
? 23 of the 32 LHOs
? 9 of the 38 S38 community providers
? 20 of the 29 statutory acute hospitals
? 9 of the 16 S38 voluntary acute hospitals
? 7 for national services such as regional corporate finance and
National Shared Services
10
Blended rate of 8% for PRSI, 9% for Pensions and 20% for overheads
A SHAPE OF FINANCE
93
CONFIDENTIAL – between PA and The Health Service Executive
In the following sections, we analyse the data at by process, activity, cost
and grade.
A.2 Process analysis
Total finance headcount and WTE was analysed by core processes
(decision support, compliance and transaction processing), non-core finance
processes and other non-finance processes.
Figure 20: WTE by core and non-core finance processes
? This analysis shows that 54% of effort (WTE) is expended on
transaction processing, 16% is on compliance and 15% is on
decision support.
? The analysis also shows that around 14% of effort (180 WTE) is
expended on non-core finance processes – corporate governance,
line management, general administration and finance related
project work.
? Around 53% of the non-core time is spent on general
administration (95 WTE).
? It would be interesting to see whether general administration is
significant in other support functions and whether there are
opportunities to restructure administration across functions.
? 37 WTE are engaged in finance projects.
? Understanding these projects and how they relate to the Finance
Reform Programme would be helpful particularly in the context of
releasing resources to work on that programme.
? Line management accounts for 44 WTE suggesting an average
span of control of 1:34.
? We would expect a ratio of 1:15 in transaction processing and 1:9
in compliance and decision support.
Focusing on the core finance processes, the allocation of finance WTE is as
follows:
Figure 21: The Current and Future shape of Finance
Research across public sector organisations found that the average ‘shape’
is decision support 20%, compliance 35% and transactional 45%, with an
aspiration to move towards 40% decision support and 30% on both
compliance and transaction processing. Best in class is 70% focused on
decision support.
The analysis shows that disproportionate effort is being spent on transaction
processing which echoes previous reports and business cases and argues
for process redesign, transaction volume reduction and a restructured
service delivery model.
54% 16% 15% 14%
0% 20% 40% 60% 80% 100%
As Is TRANSACTIONAL
COMPLIANCE AND CONTROL
DECISION SUPPORT
NON CORE PROCESSES
63%
45%
19%
35%
18%
20%
0% 20% 40% 60% 80% 100%
As Is
Traditional
TRANSACTIONAL
COMPLIANCE AND CONTROL
DECISION SUPPORT
94
CONFIDENTIAL – between PA and The Health Service Executive
A.3 Duplication of process activities
By duplication of process activities we mean the number of locations where
a process activity (such as payroll processing) takes place. Significant
duplication increases the risk of process variation and complicates
governance and control. It is also an inefficient use of resources. Good
practice suggests that process activities should be located:
? In operational or regional finance where the process activity
requires local interaction or data capture
? In national finance where the process activity requires specialised
knowledge or expertise
? In shared service where the process requires little or no site-
specific input and is process intensive.
The following charts show the number of locations where each finance
activity takes place. Where process activities should be local, the challenge
is to ensure standardisation and reduce the volume of
transactions/complexity of work; where process activities should be
centralised, the challenge is to consolidate.
Figure 22: Compliance
Applying leading practice principles, the following table indicates where
these processes should be delivered.
Activity Operational
/ regional
finance
National
finance
Shared
services
Governance and controls –
development of internal controls and
communication of regulatory
requirements
?
Period end closure - raising of
journals and account reconciliations
? ?
Cash management – cash forecasts,
approval of creditor payments and
income cash collection
?
Financial statements – production of
periodic regulatory reports
?
Treasury / Vote: cash flow budgeting
and management, cash accounting
and Vote returns to the Department
?
Capital accounting – accounting for
fixed assets
? ?
Financial risk management and
insurance – insurance and risk
management strategy and
processing insurance claims
?
Taxation – advice and guidance and
tax returns
? ?
Systems support – upgrades and
systems maintenance
?
The analysis suggests that opportunities exist to consolidate compliance
activity and to redesign how compliance services are delivered as part of the
move to a new operating model.
Figure 23: Transaction Processing
86.00
79.00
64.00
58.00
32.00 34.00
29.00
37.00
47.00
-
20.00
40.00
60.00
80.00
100.00
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95
CONFIDENTIAL – between PA and The Health Service Executive
Applying leading practice principles, the following table indicates where
these processes should take place.
Activity Operational
/ regional
finance
National
finance
Shared
services
Order to receipt – raising and approving
requisitions, approving and issuing orders
and receipting goods and services
?
Invoice approval to payment – matching of
supplier invoices to orders and receipts
and payment of invoices
?
Payroll changes - permanent changes (e.g.
starters, leavers, transfers) and temporary
changes (e.g. overtime, absence) – data
collection, data validation and data input
?
Private health insurance - collation of
claims documentation, submission of
claims to insurers and responding to
? ?
Activity Operational
/ regional
finance
National
finance
Shared
services
questions
RTA claims - recovery of hospital care
costs from patients who claim
compensation for RTAs
?
A&E cost recovery - recovery of €100
charge for A&E visits
?
Other income - recording of sundry income
?
Cash management and debt recovery -
matching of receipts to invoices and
recovery of overdue receipts
?
The analysis suggests that there is a requirement to standardise the front
end of processes and opportunities to reduce the number of transactions
and consolidate activities which should be centralised
78.00
99.00
68.00
60.00
28.00
25.00
129.00
58.00
56.00
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
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96
CONFIDENTIAL – between PA and The Health Service Executive
Figure 24: Decision Support
Applying leading practice principles, the following table indicates where
these processes should take place.
Activity Operational
/ regional
finance
National
finance
Shared
services
Financial strategy and planning - support
for medium term financial planning,
supporting the organisation to consider the
impact of new legislation and changes to
planning assumptions
?
Corporate budgeting -supporting the
Annual Estimates Process and corporate
budget setting
?
Activity Operational
/ regional
finance
National
finance
Shared
services
Corporate financial management and
reporting - production and development of
periodic financial reports for HSE board
and internal management, and
development and monitoring of cost
?
Programme financial management and
reporting - analysis of expenditure by care
group or national programme
?
Operational budgeting - supporting the
Annual Estimates Process at a regional or
local level and operational budget setting
?
Operational financial management and
reporting - production of monthly budget
statements, review of monthly reports with
operations
?
Cost containment planning - time spent on
the preparation and review of cost
containment plans
?
Costing - collation of diagnostic and
intervention activity into DRG for tariff
recovery, income and expenditure
statements by directorate/speciality
(through activity or patient costing)
?
Provision of financial advice - insight and
analysis which adds value to routine
financial management and reporting
? ? ?
Value for money - service reviews,
Benchmarking and consideration of new
ways of working and delivery models
?
The analysis suggests that there is an opportunity to consolidate decision
support activity (such as value for money) and to ensure consistency in
63.00
37.00
61.00
47.00
79.00
86.00
76.00
48.00
82.00
60.00
-
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20.00
30.00
40.00
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80.00
90.00
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97
CONFIDENTIAL – between PA and The Health Service Executive
decision support activity for hospitals and ISAs (e.g. service line costing
approach).
A.4 Fragmentation
By fragmentation we mean the number of finance activities undertaken with
an individual role. The argument is that where effort is spent on many
finance activities, skills are quality are diluted. The following table identifies
the average number of activities undertaken at each grade level:
Grade Average activities
AND 11
Finance Director 15
General Manager 9
Grade VIII 11
Grade VII 8
Grade VI 6
Grade V 5
Grade IV 4
Grade III 2
The analysis indicated that senior grade staff are supporting a wide range of
finance activities, which may reflect insufficient capacity in more junior
grades through non-replacement of staff and indicates opportunities to make
more use of skilled and qualified staff at lower grades.
A.5 Activity profile of core processes
We have looked at the profile of process activities within core processes.
The following bar charts identify that the process activities consuming the
most WTE effort.
Figure 25
ecision Support
Decision support effort is mainly expended on monitoring and evaluation
activity – operational budgeting, operational financial management and
reporting, programme financial management and reporting, corporate
financial management and reporting, corporate budgeting and cost
containment planning (70%).
7%
3%
11%
7%
11%
27%
8%
9%
11%
5%
0% 5% 10% 15% 20% 25% 30%
Financial Strategy & Planning
Corporate Budgeting
Corporate Financial Management and Reporting
Programme Financial Management and Reporting
Operational Budgeting
Operational Financial Management and Reporting
Cost Containment Planning
Costing (Job, project, patient level)
Provision of Financial Advice
Value for Money
98
CONFIDENTIAL – between PA and The Health Service Executive
Figure 26 Compliance
Further analysis is required to determine opportunities to consolidate
compliance activity particularly in taxation, cash management, period end
closure and governance and controls. This analysis should be undertaken
by HSE finance now and the findings incorporated into the detailed design
stage.
Figure 27: Transaction Processing
The analysis shows that around 42% of activity is focused on the front end
of transaction processes, reinforcing the opportunity for standardisation and
reduction in the volume of transactions. Around 50% of activity is expended
on repetitive and predictable processing of invoices and payroll, reinforcing
the opportunity for consolidation.
A.6 Cost Analysis
Our analysis has enabled a process “cost to serve” to be produced and this
is summarised in the table below.
The survey sought to collect volume information (e.g. number of purchase
invoices and number of payslips) but insufficient data has been returned to
enable transaction costs and a meaningful benchmarking to be undertaken
at this stage. Efforts will be made to revisit this analysis should transaction
data from out-side the statutory sector in particular be made available.
This is important to inform the future design and to provide guidance on the
overall shape of finance required going forward.
Reviewing the cost to serve data highlights areas where cost savings and
efficiencies are possible, and these are explored below.
13%
33%
9%
9%
3%
6%
3%
11%
11%
0% 5% 10% 15% 20% 25% 30% 35%
Governance and controls
Period end closure
Cash management
Financial statements - HSE and schemes
Treasury/Vote
Capital accounting
Financial risk management and insurance
Taxation (PAYE, PRSI, USC, VAT)
Systems support
14%
26%
17%
21%
10%
1%
1%
4%
6%
0% 5% 10% 15% 20% 25% 30%
Order to receipt
Invoice approval to payment
Payroll changes
Payroll processing
Private health claims
RTA claims
A&E cost recovery
Other income - car parks, restaurants
Cash matching and debt recovery
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Much of this can be done ahead of any system implementation and will
involve further automation and reduction in transaction volumes in front-end
transaction processes and the consolidation of processes in National
Finance and National Shared Services.
Table 9: Cost, WTE and number of locations by activity
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The total cost of finance is
11
€73.9m and it is broken down as per the
following table:
Table 10: Cost by grade and process
Grade Transaction
Processing
Compliance Decision
Support
Non-Core Total
€m
Grade III 12.10 1.11 0.33 1.59 15.13
Grade IV 12.00 2.00 1.26 1.92 17.18
Grade V 5.60 2.37 1.59 1.47 11.04
Grade VI 2.66 1.93 1.58 1.66 7.83
Grade VII 1.10 2.35 2.45 1.59 7.49
Grade VIII 0.34 2.37 4.28 1.63 8.62
General
Manager
0.05 0.82 1.94 0.61 3.43
Finance
Director
0.01 0.17 0.31 0.12 0.62
AND 0.13 0.43 1.52 0.50 2.57
€m 33.99 13.56 15.27 11.08 73.90
11
As there is no grade data for 41 respondents (referred to as N/A in grade data), they are not
included in the cost number. We estimate a further cost of circa €2m but do not include this in
our analysis.
Observations:
? Of the €15.27 spent on decision support, only €3.77m is
accounted for by General Managers, Finance Directors and ANDs.
? The total cost of these three grades is €6.63m; this suggests that
€2.85m (i.e. the €6.63m less €3.77m and 43%) is spent on
processes other than decision support. Anecdotal evidence
suggests that a lot of this time is spent on validation of data.
? Of the €33.4m spend on transaction processing; €24.1m is by
grade three and four level staff.
? €11.08m is spent on none-core finance processes such as general
administration and projects.
? Of the total of €73.9m, €43.35m is accounted for by grades three,
four and five.
Figure 28: Cost versus time as a % total (excluding non-core)
54%
63%
22%
19%
24%
18%
0% 50% 100%
Cost
Time spent
TRANSACTIONAL
COMPLIANCE AND
CONTROL
DECISION SUPPORT
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Figure 28 compares the cost of the core finance processes against the
WTE’s involved. The cost of transaction processing at 54% of the total is
less than the percentage of WTE’s involved of 63%. The following section
on grade analysis explains this as the majority of transaction processing is
carried out by grades three to six. AT 54%, the current cost transaction
processing is too high.
A.6.1 The opportunities for change
There are significant opportunities for change. The case for change at this
point responds to legacy weaknesses in financial management and
highlights areas where cost savings and efficiencies are possible. Further
arguments for change in response to the emerging health landscape are
discussed in Section 3 below. This high level case for change endorses
previous work on shared services business cases – that there is a significant
efficiency opportunity.
It is important to note that the ability to generate these savings relies on a
successful combination of up-skilling and/or redeploying staff and a
redundancy programme where necessary.
Whilst the following comments are based upon incomplete data, finalising
the shape of finance survey will only strengthen the case for change.
Transaction processing - Purchase to pay
There are 277 WTE supporting the purchase to pay process in over 99
locations and a full cost of €13.3m. The salary and salary on-cost element is
€11.4m.
The purchase to pay process ranges from highly manual to highly
automated. For statutory acute hospitals, accounts payable staff are located
in 8 regional offices; for the voluntary hospitals and PCCC accounts payable
is a devolved, local activity. There are opportunities to standardise, simplify
and further automate the order to receipt process, to reduce transaction
volumes and to consolidate accounts payable activity.
The purchase to pay strategy needs to be developed in conjunction with
procurement. We are aware that there is parallel work to restructure
procurement, stores management and the order to receipt process. To
optimise benefits, it is critical that purchase to pay is reviewed from an end-
to-end process perspective through co-ordinating finance and procurement
initiatives. Particular initiatives to investigate from a process perspective will
include:
? Strengthen strategic procurement (commodity management and
structured strategic sourcing programme) to reduce the number of
suppliers and transactions. [dashboard number of suppliers and
invoices]
? Implementation of best practice e-procurement technology to
further automate the order to receipt process, reducing paper-
based manual ordering and reducing time in the approval process.
? Increased compliance management to supplier, process and
contract.
The business case for the national finance and procurement system
identified 244 WTE currently involved in purchase to pay and the estimated
end state WTE as 136 – a saving of 108 (44%). Applying a 44% reduction to
the 277 number (122) and taking a Grade III salary plus salary on-cost of
€35,400 equates to a target annual saving of €4.3m.
The 244 WTE as per the national finance and procurement system business
case only includes statutory staff. We would expect a much larger number
as the voluntary organisations are included yet the data collection suggests
277 people. This is an example of the incomplete nature of this data
collection exercise; only 9 of the 16 S38 voluntary acute hospitals and 9 of
the S38 community providers submitted returns. Given the localised nature
of these activities, it is estimated that the total number is much higher and
therefor the potential annual savings is also higher than the €4.3m above.
The move to HSCPs is an opportunity to start to realise savings even within
the current systems environment. Formation of groups will necessitate
combining legacy hospital and PCCC finance teams.
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Transaction processing - Payroll
There are 259 WTE supporting the payroll process in over 60 locations and
a full cost of €12.8m. The salary and salary on-cost element is €10.9m.
Payroll processing staff are currently located in 9 departments and there is a
range of processing arrangements in place. The process for payroll changes
is largely manual. There are opportunities to automate the front end of
payroll through self-service technologies and as part of operational systems
development, such as rostering. The end-to-end payroll process redesign
has to align with work in HR and operations. There is a significant, but
challenging, opportunity to reduce the number of payrolls. There are
currently 101 different payroll cycles (6 weekly, 75 two weekly, 4 four weekly
and 16 monthly) and this figure does not include all of the voluntary
organisations.. Payroll process efficiencies will arise from:
? Standard payroll data capture, processes and procedures
? Centralisation of payroll processing
? HR and payroll systems integration
? Self-serve technology
? Automation of payroll changes through self-service technologies
and operational systems
? On-going benchmarking of payroll processes and costs.
The median benchmark for payroll staff to total employees is 1:1200. On the
basis of 116,964 HSE staff, this suggests 97 staff in payroll – a saving of
162 WTE in comparison to current staffing levels. The National Payroll
Shared Services Transition business case identified a potential saving of 94
WTE from the internal implementation option. Taking a Grade III salary plus
salary on-cost of €35,400, a saving of 162 staff equates to a target annual
saving of €5.7m
Transaction processing - Income
There are 113 WTE involved in the income process in over 100 locations at
a full cost of €5.6m. RTA, A&E and other income is a local activity with
limited opportunity for efficiency savings. Private health claims processing
comprises preparing the claim which has to be local, and processing the
claim which should be centralised (and is partly through National Shared
Services). Further analysis is required to identify efficiency savings from
further consolidation. A 20% reduction in WTE numbers from further
standardisation and centralisation (including voluntary organisations) using a
Grade III salary plus salary on-cost of €35,400 generates annual savings of
€0.5m.
The time value of money should also be considered here. An automated
efficient Income process across both voluntary and statutory providers
should result in the quicker receipt of cash to the HSE.
Compliance
Overall, Compliance involves 207 WTE at a full cost of €13.6m and a salary
plus salary on-cost of €11.6m.
Efficiency opportunities will arise in period end processing from both the
implementation of HSCP groups and the move to shared services. Similarly,
the move to shared services will also reduce payroll taxation work from the
current 9 returns.
The Compliance benefits from the future operating model are principally
about control which will have an impact on pay and non-pay expenditure
rather than efficiency.
At this stage, it is difficult to calculate potential savings on a bottom up,
fundamental basis but it is not unreasonable to take the €4.2m spent on
period end process identified above and assume a saving from the
introduction of a fully automated system that would significantly reduce the
widespread manual intervention that currently takes place. This saving
should be redirected towards higher value add compliance processes as the
size of compliance is larger in the desired shape of finance.
Decision support
Overall, Decision Support involves 194 WTE at a full cost of €15.4m and a
salary plus salary on-cost of €13m.
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The move to HSCP groups will rationalise demand for operational financial
management and reporting i.e. support will be provided at a group rather
than individual hospital or LHO.
The Decision Support benefits from the future operating model are
principally around strategic planning and performance management. There
will be an impact on the quality of decision-making and challenge to the
performance of HSCPs rather than efficiency.
An observation from the data collection is that the total cost of General
Managers, Finance Directors and AND grades is €6.63m and of this €3.77m
is spent on decision support; this suggests that €2.85m (i.e. the €6.63m less
€3.77m and 43%) is spent on processes other than decision support.
Anecdotal evidence suggests that a lot of this time is spent on validation of
data prior to making decisions. It is not unreasonable to suggest that an
operating model that supports the production of timely and reliable reports
will free up this resource for greater decision support and hence a potential
benefit of circa €2m is achievable as the majority of their time should be
spent of decision support. This is before the actual benefit of better decision
making is considered on the system overall. This is a very important point.
Conclusion
The case for change at this point responds to legacy weaknesses in
financial management. Further arguments for change in response to the
emerging health landscape are not included in these estimates. This
endorses previous work on shared services business cases – that there is a
significant efficiency opportunity.
The table below summaries the potential savings and estimates that €15.8m
in annualised savings could be achieved representing 21% of the cost of
finance.
Potential Savings Identified Above Total €m
Purchase to Pay 4.3
Payroll 5.7
Income 0.5
Compliance 3.0
Decision Support 2.0
Total Potential Savings 15.5
Savings as % of total Finance Cost 21%
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A.7 Grade Analysis
The following table details the total WTE numbers by grade and process. A
number of observations are as follows:
? 54% of WTE are in transaction processing (692 out of 1273)
? Grade III and IV make up 56% of the total
? Although there is no grade data for 41 respondents as mentioned
above, these only account for 17 WTE.
Table 11: WTE numbers by grade and process
Figure 29: Analysis of grade by process
0
50
100
150
200
250
300
350
400
450
AND Finance
Director
General
Manager
Grade III Grade IV Grade V Grade VI Grade VII Grade
VIII
#N/A
TRANSACTIONAL COMPLIANCE AND CONTROL
DECISION SUPPORT NON CORE PROCESSES
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Figure 30: % of time spent on activities (by grade)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Grade III Grade IV Grade V Grade VI Grade VII Grade VIII General
Manager
Finance
Director
AND #N/A
Finance related Project Work
General Administration
Line Management
Corporate Governance
Value for Money
Provision of Financial Advice
Costing (Job, project, patient level)
Cost Containment Planning
Operational Financial Management and Reporting
Operational Budgeting
Programme Financial Management and Reporting
Corporate Financial Management and Reporting
Corporate Budgeting
Financial Strategy & Planning
Systems support
Taxation
Financial risk management and insurance
Capital accounting
Treasury/Vote
Financial statements - HSE and schemes
Cash management
Period end closure
Governance and controls
Cash matching and debt recovery
Other income - car parks, restaurants
A&E cost recovery
RTA claims
Private health claims
Payroll processing
Sum of Payroll changes
Invoice approval to payment
Order to receipt
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A.7.1 Template Returns
Region Acute hospitals - statutory Received
DML Midland Regional Hospital Mullingar ?
DML Midland Regional Hospital Portlaoise ?
DML Midland Regional Hospital Tullamore ?
DML Naas General Hospital ?
DML St Columcille's Hospital Loughlistown ?
Region Community - Statutory Received
DML LHO Area 10 Wicklow
DML LHO Area 9 Kildare / West Wicklow
DML LHO Area 11 Laois / Offaly
DML LHO Area 12 Longford / Westmeath ?
DML LHO Area 1 Dun Laoghaire
DML LHO Area 2 Dublin South East
DML LHO Area 3 Dublin South City
DML LHO Area 4 Dublin South West
DML LHO Area 5 Dublin West
Region Community - S38 voluntary Received
DML Cheeverstown House ?
DML Leopardstown Park Hospital
DML Royal Hospital Donnybrook
Region Community - S38 voluntary Received
DML Our Lady's Hospice
DML Peamount Hospital
DML Stewart's Hospital ?
DML Children's Sunshine Home ?
DML Drug Treatment Centre ?
DML Kare
DML Sisters of Charity Moore Abbey
DML Sisters of Charity Laois/Offaly
DML Sisters of Charity Delvin
DML Dublin Dental Hospital Board
DML National Rehabilitation Hospital
DML St John of God Eastern Region
DML Sunbeam House Services
Region Acute hospitals - S38 voluntary Received
DML Children's University Hospital Temple Street
DML Coombe Women's and Infants University Hospital
DML National Maternity Hospital Holles Street ?
DML Our Lady's Hospital for Sick Children Crumlin ?
DML Royal Victoria Eye and Ear
DML St James's Hospital ?
DML St Michael's Hospital Dun Laoghaire ?
DML St Vincent's University Hospital Elm Park ?
DML Tallaght Hospital ?
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Region Acute hospitals - statutory Received
South Bantry General Hospital
South Cork University Hospital ?
South Kerry General Hospital ?
South Mallow
South South Tipperary General Hospital ?
South St Luke's Hospital Kilkenny ?
South Waterford General Hospital ?
South Wexford General Hospital ?
Region Community - Statutory Received
South LHO Kerry ?
South LHO West Cork ?
South LHO Nth Cork ?
South LHO Nth Lee ?
South LHO Sth Lee ?
South LHO Sth Tipperary ?
South LHO Waterford ?
South LHO Wexford ?
South LHO Carlow / Kilkenny ?
Region Community - S38 voluntary Received
South St Mary's of the Angels Beaufort
South Lota Brothers of Charity
South Waterford Brothers of Charity
South Cope Foundation
South St John of God Tralee
South Cork Dental Hospital
South St Patrick's Kilkenny
South Carriglea Sisters of the Bon Saveur
Region Acute hospitals - S38 voluntary Received
South Mercy University Hospital Cork ?
South South Infirmary University Hospital Cork
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Region Acute hospitals - statutory
DNE Cavan-Monaghan Hospital Group: Cavan
Monaghan and Monaghan General Hospitals
?
DNE Connolly Hospital - Blanchardstown ?
DNE Louth County Hospital ?
DNE Our Lady of Lourdes Hospital Drogheda ?
DNE Our Lady's Hospital Navan
Region Community - Statutory
DNE LHO Cavan Monaghan ?
DNE LHO Louth ?
DNE LHO Meath ?
DNE ISA Dublin North City ?
DNE ISA Dublin North ?
Region Community - S38 voluntary
DNE Central Remedial Clinic
DNE Incorporated Orthopaedic Hospital (Clontarf)
DNE St Michael's House ?
DNE St Vincent's Fairview
DNE Daughters of Charity, Navan ?
DNE St John of God Drumcar
Region Acute hospitals - S38 voluntary
DNE Beaumont Hospital ?
DNE Cappagh National Orthopaedic Hospital
DNE Mater Misericordiae University Hospital
DNE Rotunda ?
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West
Region Acute hospitals – statutory
West Galway University Hospitals ?
West Letterkenny General Hospital
West Mayo General Hospital ?
West Mid-Western Hospital Dooradoyle
West Mid-Western Hospital Ennis
West Mid-Western Hospital Nenagh
West Mid-Western Regional Maternity Hospital
West Mid Western Regional Orthopeadic Hospital Croom
West Portiuncula Hospital Ballinsloe ?
West Roscommon County Hospital ?
West Sligo General Hospital ?
Region Community - Statutory
West LHO Donegal ?
West LHO Sligo / Leitrim ?
West LHO Mayo ?
West LHO Roscommon ?
West LHO Galway ?
West LHO Clare ?
West LHO Limerick ?
West LHO Nth Tipperary ?
Region Community - S38 voluntary
West Brothers of Charity Galway
West Brothers of Charity Limerick ?
West Brothers of Charity Clare
West Daughters of Charity Limerick
West Daughters of Charity St Anne's Roscrea
West Brothers of Charity Roscommon ?
West Wisdom Services Cregg House, Sligo ?
Region Acute hospitals - S38 voluntary
West St John's Hospital Limerick
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ANDOF-led finance teams & National Services
Received
Annual Financial Statements and Governance
?
Capital
?
Corporate Reporting (Finance)
?
Finance, Central
?
Finance Department, SS
?
Payroll, Shared Services
?
Value for Money
?
Regional Finance DNE
?
Regional Finance DML
?
Regional Finance South
?
Regional Finance West
?
National Cancer Screening Service
?
PCRS
?
NMPDU
?
National Ambulance Service
?
111
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B.1 Introduction
The Training Needs Analysis survey was developed to assess the
requirements for the training and development of future skills and
capabilities identified. The questionnaire was addressed to all staff involved
in finance activities. This on-line questionnaire was designed so that it
should have taken no more than 30 minutes to complete. It was sent to
each person identified in the Shape of Finance Template. Every person who
completed the template was requested to forward the link to each member
of their team identified with an instruction and explanation e-mail which was
also provided.
Participants were asked to assess their level of expertise against each of the
relevant skills and capabilities. It is not expected that all staff will have
expertise in all areas identified and a ‘not applicable’ option (N/A) was there
for this purpose. The results of the assessment will be used to identify key
areas for future skills/capability development and will inform the design of
training programmes to support the development of financial management
practice across the HSE.
The survey was sent out on Monday, May 20th with participants being
requested to complete it by Friday, May 31st. The initial response was
mixed and an extension was provided till Monday, June 17th.
702 people completed the survey from the 1,628 people identified in the
Shape of Finance exercise. It must be noted that a number of staff reported
difficulties in submitting the survey which was due to HSE servers going
down intermittently during this time.
The survey was split into two sections; the first was a number of questions
of a factual nature such as age group and length of experience. The second
section asked participants to rate themselves against different skills. There
were four skills headings and each had a number of questions; behavioural
skills, technical skills, interpersonal skills and decision support skills.
B.1.1 Staffing Profiles: Analysis and Observations
The following are the high level observations from the analysis of the data:
? 111 qualified accountants out of the 702 respondents (16%), 73%
of which are Grade 8 and higher. Whilst numbers of trainee
accountants are not included (or identified through the survey), this
statistic raises concerns for succession planning
? Only 8% of qualified accountants are in the age group 20-39. This
is very low and although it does not take effect of those in training,
it suggests a significant skills gap that needs to be addressed
? Responses indicated 280 team managers and team leaders
managing 420 team members, which represents a ratio of 1:1.5
B TRAINING NEEDS ANALYSIS
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and highlights a potential to examine layers of management and
spans of control as part of any detailed organisation design.
However, there will be a range of spans of control from large to
small teams and managers working without teams
? 69% of the staff supporting finance activities are aged 40 and
above, which although indicating considerable knowledge and
experience highlights a requirement for succession planning,
particularly for finance activities where deep technical or system
knowledge is required.
Grade Manager Team
Leader
Team
Member
AND 9
General Manager 29 1
VIII 54 8 5
VII 28 15 13
VII 18 33 16
V 16 32 56
IV 16 125
III 1 203
Other 15 5 4
Total 169 111 422
Table 12: Analysis of Respondents by Grade
Table 13: Analysis of Respondents by Age, Qualifications & Experience
Age Profile Manager Team
Leader
Team
Member
20-29 1 0 23
30-39 25 22 144
40-49 88 49 136
50-59 51 37 104
60-69 4 3 15
Qualifications
Qualified Accountant 85 9 17
Degree/MBA 89 29 73
Experience
Up to 3 years 11 7 37
Greater than 3 years, less than
10 years
16 11 145
Greater than 10 years, less than
15 years
29 40 114
Greater than 15 years 113 53 126
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B.1.2 Training Needs Analysis and Observations
A view has been taken as to the desired skills for a manager, a team leader
and a team member in each of the service delivery model elements:
operations excellence, financial specialists and business partnering.
The actual skills for each are taken from those who work in transaction
processing for operations excellence, in compliance for finance specialists
and in decision support for business partnering.
In summary, there is good alignment between desired and actual
behavioural skills of staff across the HSE. However the gap widens with the
other three categories; interpersonal skills, technical skills and decision
support skills.
The following diagram highlights the gaps between the desired and actual
skills of a manager in Business Partnering.
Figure 31: Business Partner – Manager
The following diagram highlights the gaps between the desired and actual
skills of a team member in Business Partnering.
Figure 32: Business Partner - Team Member
Comparing both of the above diagrams highlights the difference in the
desired skills of a manager versus a team member. It also highlights the
similarities in current skill levels of both roles whereas they should be quite
different as can be seen by comparing both blue lines (desired skill levels).
The skills gaps at both levels need immediate attention with particular
attention required to address the gaps at management level. It is critical that
there are supports in place to help and encourage a staff member at in a
team member role progress through to a team manager role over a period of
time.
It is also worth highlighting the different skills required for a manager in
operations excellence versus a manager in transaction processing. Although
difficult to see below, the decision support and technical skills are different,
therefore the support required in developing these needs to acknowledge
this.
0
1
2
3
4
5
Behavioural
Skills
Interpersonal
Skill
Technical
Skills
Decision
Support
Desired
Actual
0
1
2
3
4
5
Behavioural
Skills
Interpersonal
Skill
Technical Skills
Decision
Support
Desired
Actual
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Figure 33: Operations Excellence - Manager
Figure 34: Finance Specialist - Manager
Conclusion
The success of the future operating model will depend heavily on having the
right people in the right roles. The various different roles across decision
support, finance specialists and operation finance all require different skills.
It is critical that the design phase identifies and describes these various
roles and skills and that this information is incorporated into the HSE’s HR
strategy. This strategy should be underpinned by the following activities:
? A workforce development plan, this will identify the specific requirements
across the system;
? The provision and completion of financial training courses by both
finance and non-finance staff will create system-wide financial
management awareness. Train and support budget holders and service
managers in financial management as they will be expected to take
ownership of their budget and their performance will be assessed
accordingly;
? Enable a compulsory Continuous Professional Development (CPD)
programme supported by learning and development plans. The survey
highlighted the shortage of qualified accountants in the 20 to 39 year old
age bracket. It is important that staff are encouraged and supported to
continuously up skill and subsequently rewarded with more challenging
roles. The results of CPD programmes should provide real time skills
analysis data;
? Defined skills and capabilities for senior roles will be established; and
? Create a programme of performance management that supports desired
behaviours. This will reward positive behaviours but will also have the
support of the CFO to take action when undesirable behaviours are
discovered.
-
1
2
3
4
5
Behavioural
Skills
Interpersonal
Skills
Technical Skills
Decision
Support
Desired
Actual
-
1
2
3
4
5
Behavioural
Skills
Interpersona
l Skills
Technical
Skills
Decision
Support
Desired
Actual
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C.1 Introduction
The emergence of Hospital Groups in the coming months will provide a real
opportunity to rationalise financial management across the sector, and bring
consistency, transparency and improved effectiveness to operational
financial management practices.
There are some strong examples of good practice in financial management
within the hospital sector, and it is important that these form the basis for
future practice as the sector moves towards Trust status.
The move to groups and money follows the patient will have a significant
impact on financial management practice in the acute sector, as further
service reconfigurations will be required to ensure long term sustainability.
Financial management practice must change, to enable groups to operate
as single entities, not a collection of individual hospitals; and to support the
increased focus on service line management and patient level costing
required to enable groups to operate effectively in the new environment.
C.2 The emerging group structures
Hospital Groups generally comprise a combination of statutory and voluntary
providers. Whilst voluntary providers may continue to have external
reporting requirements, within the HSE, the distinction between statutory
and voluntary is removed as the Hospital Groups will work with HSE as a
single organisation (with several locations).
The following analysis presents the 2013 budget allocation, the number of
finance WTEs, the financial systems, the financial performance and the
maturity of financial management practice by hospital for each group.
This provides a useful snapshot of the current position and insight to inform
the direction of travel each group should take as it transitions to Trust status
over time, to ensure that financial management arrangements are
appropriate given the challenging financial context in which they are
operating.
It is clear that there is little correlation between size of budget, finance staff
in place and relative financial performance.
In general and not specific to any hospital in particular, this is down to a
number of reasons such as:
? Hospital spend is outside the control of finance – finance is seen
purely as a reporting function
? Wrong people in certain jobs – HR policy of filing a finance post at
most grades with a general administration person irrespective of
experience, knowledge or even interest perpetuates this problem
? Resource allocation – the balance of WTE across transaction
processing, compliance and decision support is significantly
skewed towards transaction processing and as such the budget
C EMERGING HOSPITAL GROUPS
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holder in the individual health and social care provider is most
likely not getting the support needed in terms of decision support.
In the case of one hospital, transaction processing takes up 79%
of finance WTE resource.
C.3 Steps towards a new operating model
The immediate priority for emerging groups will be to introduce financial
management arrangements across the entirety of the group to enable the
financial position to understood from a group perspective. It is suggested
that the financial management arrangements in place within the strongest
performing hospital within the group be used as the basis for interim
arrangements.
It will be expected that all aspects of the new finance operating model will be
implemented in the groups over time which means:
? All transaction processing to be carried out by shared services
? A single financial management system
? A standardised approach to service line management and patient
level costing to be deployed across all groups to facilitate Money
Follows The Patient.
This will provide a significant opportunity to design and develop a financial
management model for the acute sector , which builds on existing good
practice, and to deploy this approach consistently across the sector.
This will be a significant programme of change, which should be owned by
the CFO to ensure that outcomes align with the mandated financial
management framework and the resulting financial management practices
are fit for purpose.
A similar approach should be adopted when considering the outcome of the
ISA review in due course.
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C.4 Dublin East
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C.5 South / South West
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C.6 Dublin North East
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C.7 Dublin Midlands
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C.8 West / North West
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C.9 Mid West
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D.1 Business partnering
The following are a selection of case studies from organisations that have
implemented finance business partners.
Case study – Boeing
Boeing established a strategic vision for Finance and Accounting to become
a true partner with the business by shifting focus to value-adding activities.
Boeing’s senior management recognised that the company’s financial
processes and related systems did not support the strategic objectives.
They therefore:
? Identified the strategic capabilities of Finance
? Focused on the supporting processes to those capabilities to identify opportunities
for streamlining, simplification or standardisation, and set priorities
? Compared Boeing practices and capabilities with best practices in accounting
transaction processing, close and consolidation, reporting and analytics, planning
and budgeting, and systems architecture
? Identified and prioritised improvement opportunities and developed a business
case to move forward
? Guided the development and implementation of ‘to be’ processes and systems to
ensure a quality solution in a timely manner.
Based on the pain points and alignment to strategic capabilities, Boeing
identified six work streams that simplified and standardised, and created
headroom for more effective partnering with the business:
? Rationalised chart of accounts – reduced from more than 15,000 to less
than 1,000
? Moved to a single level consolidation – rationalised five sub-consolidation
systems
? Standardised and monitored compliance and close procedures –
reduced close from 12 to five days
? Implemented common tools for data capture – 75 per cent reduction in
the use of spread sheets for statutory data gathering
? Standardised on one general ledger across the enterprise – more than
30 discrete general ledgers were consolidated to one.
D CASE STUDIES
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Case study – BBC
The BBC adapted to rapid forecast changes in audience behaviours,
programme initiatives and new technologies by creating a new enterprise
model. Finance decided it needed to develop a more agile structure to
support this and as a starting point redefined its mission:
“Building a better business, proactively driving value
for our audiences through informed and insightful
decision making, and fostering a culture of continuous
improvement across the BBC. A business and
Finance team, which works in partnership with the
divisions and maintains a transparent system of
effective standards, processes and controls.”
Characteristics of BBC Finance’s vision:
? Finance is a strategic business partner, agile and responsive to business
needs
? Processes are streamlined and easy to use
? Finance supports the BBC across all its key measurement needs,
providing relevant understandable information
? The Finance organisation comprises a team of skilled professionals
? Finance supports diligence and rigour with internal controls
? A single technology system underpins Finance
? Finance consumes no more than one per cent of revenue
Case study – a multinational pharmaceutical group
After a merger, the new organisation embarked on a programme to drive out
the synergies in research and development (R&D), sales, marketing and
back-office support services. It therefore:
? Outsourced its IT support (PCs, servers and software support) to IBM
? Reduced the number of enterprise resource planning (ERP) applications
? Consolidated and integrated the businesses in the US.
This left a complex organisation in Europe with a matrix of business units for
sales and marketing, discovery, development and manufacturing in each
country. The Finance function has responded by:
? Creating three transaction processing shared service centres in Europe
? Embedding Finance specialists in the business units
? Rolling out Hyperion planning
The next stage is to leverage a component business modelling analysis of
the existing organisation, and to roll out a PeopleSoft HR platform to
construct a framework for global support and enabling services, including
Finance.
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Case study – IBM
The IBM financial systems blueprint was redesigned based on commonality
across an integrated matrix management system. This involved:
? Creating common data definitions, corporate data standards for financial
elements and a worldwide chart of accounts
? On that foundation, building common applications for accounting
transactions such as employee disbursements, inter-company billings,
accounts payable, accounts receivable and assets
? Feeding source data into a common ledger system to allow aggregation
by unit at the corporate level.
On a base of common, worldwide accounting data, IBM could then deploy a
robust financial information strategy and common worldwide planning
system to deliver business and treasury management information. Systems
were run in common geographic mega centres and data maintained in a
worldwide financial information warehouse. IBM invested in collaborative
solutions: instant messaging, online team rooms and Web conferences.
Using programmes such as IBM ThinkPlace*, which is designed to capture
ideas from across the company, IBM gained more input on which to build
through active collaboration with colleagues. The foundation for this culture
of collaboration is the On Demand Workplace, which allows the
communication of information to be tailored to the requirements of specific
roles.
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D.2 Shared services
In 2012 the UK Government announced plans for significant changes in their
corporate shared services. The Next Generation Shared Services Strategic
Plan outlines how government departments and arms-length bodies will
share functions to deliver potential savings of between £400 and £600m a
year in administration costs. These cost savings will come from harnessing
the benefits of shared services, including standardized processes, fewer
errors, increased automation, leveraged technology, and more efficient use
of resources.
As head of the Civil Service, Sir Bob Kerslake, said
“By bringing together more of the services that
departments use, we can not only save the taxpayer
millions, an important goal in its own right, but we can
deliver on our commitment to become a more unified
body providing a first class service to the public.”
Full details of the structure will be revealed later this year, however there will
be a maximum of ?ve Shared Service Centres (SSCs). Two SSCs will be
independent of any single customer, and three SSCs will be standalone in
terms of operations but will be subject to performance monitoring. There will
also be a Crown Oversight Function responsible for governance. The two
independent SSCs will be provided through the divestment of the
Department for Transport (DfT) SSC to an outsourced provider and the
second will be built on the Department for Work and Pensions (DWP) SSC.
The functions that will move into share services include: human resources,
payroll, record to report order to cash, and accounts payable. Only certain
‘core functions’ will be moved into the shared service centres, and for
‘optional’ services, departments can compare costs with their in-house
services and decide whether they will retain the service or move it to shared
service centre.
Also announced in the report were details on the creation of a Crown
Oversight Function that works with departments to deliver improvements in
the quality of service and reduction in the operating costs of shared services
towards upper quartile performance. The Crown Oversight Function will
monitor performance of all ?ve SSCs and departmental retained functions.
D.3 Big Data
D.3.1 Why better use of information will improve
outcomes for patients throughout the NHS
NHS England was introduced towards the end of 2012 and is already
playing a vital role in on-going efforts to improve outcomes for patients. One
of its main responsibilities is to monitor the performance of commissioners
and providers, collating key indicators from thousands of organisations and
using them to define clear standards and increase accountability.
Working with data on this scale, however, has proven to be highly
problematic in the past. As a result, anomalies that should automatically
require urgent management attention – such as high mortality rates and
anomalous trends in care provision - were not acted upon in time. To
support its duties effectively, the Board needs a single version of the truth
that draws from vast data sets in NHS and visualises performance indicators
in a consistent and easy-to-use presentation.
A new intelligence tool developed by NHS England in partnership with PA
Consulting Group, QlikTech and Google Enterprise is a making this ambition
a reality. The first phase in the intelligence tool’s development brings
together over 100 indicators from 10 different national sources, covering
NHS England and including A&E performance and mortality rates. This
provides a single version of the truth that allows commissioners to effectively
manage the quality of care. Commissioners can use the clear and concise
user interface to explore potential issues by comparing performance across
providers and interactively exploring the data in near real-time for that
specific organisation.
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The power of the software that this tool uses has already been
demonstrated in a previous experiment by PA, which used the same Google
big query tools to analyse anonymised NHS Hospital Episode Statistics
data. Running sophisticated queries on this data, which consists of 1 billion
rows of data, would previously have taken days, if not weeks. With the new
technology, however, the data could be worked with almost instantly. Asking
the entire HES database about hospital admissions after heart attacks took
about 20 seconds when ordinarily it would have taken much longer. The
potential impact of this new tool for NHS England is therefore considerable.
As well as enabling NHS England to work effectively with massive
quantities of data, another significant outcome of the new technology is that
it will allow a greater number of people to analyse and make sense of
healthcare information available. As part of its transparency agenda, the
Government has committed itself to making performance figures available to
data scientists and to the wider public. As a development, this is in line with
trends beyond healthcare. Ofsted, for example, make school reports
available – why should it not be the same for healthcare information? This
would enable patients to review the performance of health services and
individual doctors. The only requirement is the ability to know how to work
with data, to ask the right questions and to (in the words of Google) ‘have a
conversation with the data.’
The creation of this new technology is a clear indication that we are at a
hugely exciting time in the development and transformation of both the NHS
and healthcare generally. If the industrial revolution was driven by steam,
the healthcare revolution will be driven by data.
D.3.2 Potential of Big Data
The amount of data in our world has been exploding, and analysing large
data sets—so-called big data—will become a key basis of competition,
underpinning new waves of productivity growth, innovation, and consumer
surplus, according to research by MGI and McKinsey's Business
Technology Office. Leaders in every sector will have to grapple with the
implications of big data, not just a few data-oriented managers. The
increasing volume and detail of information captured by enterprises, the rise
of multimedia, social media, and the Internet of Things will fuel exponential
growth in data for the foreseeable future.
D.3.3 Deep analytical talent: Where are they now?
Research by MGI and McKinsey's Business Technology Office examines
the state of digital data and documents the significant value that can
potentially be unlocked.
MGI studied big data in five domains—healthcare in the United States, the
public sector in Europe, retail in the United States, and manufacturing and
personal-location data globally. Big data can generate value in each. For
example, a retailer using big data to the full could increase its operating
margin by more than 60 per cent. Harnessing big data in the public sector
has enormous potential, too. If US healthcare were to use big data creatively
and effectively to drive efficiency and quality, the sector could create more
than $300 billion in value every year. Two-thirds of that would be in the form
of reducing US healthcare expenditure by about 8 per cent. In the developed
economies of Europe, government administrators could save more than
€100 billion ($149 billion) in operational efficiency improvements alone by
using big data, not including using big data to reduce fraud and errors and
boost the collection of tax revenues. Users of services enabled by personal-
location data could capture $600 billion in consumer surplus. The research
offers seven key insights.
1. Data use has swept into every industry and business function and are
now an important factor of production, alongside labour and capital. We
estimate that, by 2009, nearly all sectors in the US economy had at
least an average of 200 terabytes of stored data (twice the size of US
retailer Wal-Mart's data warehouse in 1999) per company with more
than 1,000 employees.
2. There are five broad ways in which using big data can create value.
First, big data can unlock significant value by making information
transparent and usable at much higher frequency. Second, as
organizations create and store more transactional data in digital form,
they can collect more accurate and detailed performance information
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on everything from product inventories to sick days, and therefore
expose variability and boost performance. Leading companies are
using data collection and analysis to conduct controlled experiments to
make better management decisions; others are using data for basic
low-frequency forecasting to high-frequency nowcasting to adjust their
business levers just in time. Third, big data allows ever-narrower
segmentation of customers and therefore much more precisely tailored
products or services. Fourth, sophisticated analytics can substantially
improve decision-making. Finally, big data can be used to improve the
development of the next generation of products and services. For
instance, manufacturers are using data obtained from sensors
embedded in products to create innovative after-sales service offerings
such as proactive maintenance (preventive measures that take place
before a failure occurs or is even noticed).
3. The use of big data will become a key basis of competition and growth
for individual firms. From the standpoint of competitiveness and the
potential capture of value, all companies need to take big data
seriously. In most industries, established competitors and new entrants
alike will leverage data-driven strategies to innovate, compete, and
capture value from deep and up-to-real-time information. Indeed, we
found early examples of such use of data in every sector we examined.
4. The use of big data will underpin new waves of productivity growth and
consumer surplus. For example, we estimate that a retailer using big
data to the full has the potential to increase its operating margin by
more than 60 percent. Big data offers considerable benefits to
consumers as well as to companies and organizations. For instance,
services enabled by personal-location data can allow consumers to
capture $600 billion in economic surplus.
5. While the use of big data will matter across sectors, some sectors are
set for greater gains. We compared the historical productivity of sectors
in the United States with the potential of these sectors to capture value
from big data (using an index that combines several quantitative
metrics), and found that the opportunities and challenges vary from
sector to sector. The computer and electronic products and information
sectors, as well as finance and insurance, and government are poised
to gain substantially from the use of big data.
6. There will be a shortage of talent necessary for organizations to take
advantage of big data. By 2018, the United States alone could face a
shortage of 140,000 to 190,000 people with deep analytical skills as
well as 1.5 million managers and analysts with the know-how to use the
analysis of big data to make effective decisions.
7. Several issues will have to be addressed to capture the full potential of
big data. Policies related to privacy, security, intellectual property, and
even liability will need to be addressed in a big data world.
Organizations need not only to put the right talent and technology in
place but also structure workflows and incentives to optimize the use of
big data. Access to data is critical—companies will increasingly need to
integrate information from multiple data sources, often from third
parties, and the incentives have to be in place to enable this,
intellectual property, and even liability will need to be addressed in a big
data world. Organizations need not only to put the right talent and
technology in place but also structure workflows and incentives to
optimize the use of big data. Access to data is critical—companies will
increasingly need to integrate information from multiple data sources,
often from third parties, and the incentives have to be in place to enable
this.
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E.1 Introduction
Workshops were held to consider options for compliance, transaction
processing and decision support. These workshops were attended by the
Working Group and process specialists.
At each workshop:
? Options were described
? Evaluation criteria proposed
? Scoring mechanism proposed
Workshop attendees then debated the options against the evaluation criteria
and scoring mechanism to reach a recommended solution
E.2 Compliance
The Compliance option appraisal considered the degree to which operating
model attributes should be mandated across the system.
The degrees of prescription considered were:
? Mandatory: where all HSCPS are required to comply with
? Recommended: where all HSCPS are encouraged to comply with
standards defined by CFO
? Guidance: where all HSCPS are to consider standards defined by
CFO
The appraisal considered the following operating model attributes
Operating model attribute
Process (the way in which the service is undertaken)
Governance and controls (internal and external regulations)
Information (data governance)
Technology (supporting systems)
Skills of the finance professionals in the System
Culture and behaviours (compliance and sanctions)
A group discussion captured the advantages and disadvantages arising
from mandating aspects of the operating model, then each option was
scored to determine the preferred option.
E.2.1 Recommendation and scoring
The overwhelming recommendation was for a mandatory financial
management framework.
E OPTIONS APPRAISAL
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Finance Operating Model
Options Appraisal: Compliance
Average score from all Groups
Option A B C D E F Total
Process (the way in which the service is undertaken)
As Is 0.67 0.33 0.00 0.33 0.00 0.67 2.00
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 5.00 4.33 29.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.33 2.33 2.00 2.33 2.00 2.33 13.33
Guidance: all HSCPS are to consider standards defined by CFO 0.67 0.67 0.67 0.67 0.67 0.67 4.00
Governance and controls (internal and external regulations)
As Is 1.33 1.33 1.33 1.00 1.00 1.33 7.33
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 4.33 3.67 28.00
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 1.00 1.00 1.00 1.00 1.00 1.67 6.67
Guidance: all HSCPS are to consider standards defined by CFO 0.33 0.33 0.33 0.33 0.67 0.67 2.67
Information (data governance)
As Is 0.67 0.33 0.33 0.33 0.00 0.67 2.33
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 5.00 4.33 29.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 1.33 1.33 1.33 1.33 1.33 1.33 8.00
Guidance: all HSCPS are to consider standards defined by CFO 0.33 0.33 0.33 0.33 0.33 0.33 2.00
Technology (supporting systems)
As Is 1.33 1.33 1.00 1.00 1.00 1.67 7.33
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 5.00 4.33 29.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.00 2.00 2.67 2.00 2.00 2.00 12.67
Guidance: all HSCPS are to consider standards defined by CFO 0.67 0.67 2.00 0.67 0.67 0.67 5.33
Skills of the finance professionals in the System
As Is 0.67 0.67 0.67 0.67 0.67 0.67 4.00
Mandatory: all HSCPS are required to comply with standards defined by CFO 3.67 4.33 4.33 4.33 4.33 3.00 24.00
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.33 3.00 2.33 2.33 2.33 3.00 15.33
Guidance: all HSCPS are to consider standards defined by CFO 0.67 0.67 1.00 0.67 0.67 1.00 4.67
Culture and behaviour
As Is 0.33 0.33 0.33 0.33 0.33 0.33 2.00
Mandatory: all HSCPS are required to comply with standards defined by CFO 3.00 3.67 3.67 3.67 3.00 2.33 19.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.33 3.00 2.33 2.33 1.67 2.33 14.00
Guidance: all HSCPS are to consider standards defined by CFO 1.00 0.67 1.00 0.67 0.67 1.00 5.00
Deliverability:
Capability,
Capacity,
Affordability &
Risk
Alignment
with Design
Principles
Meets
requirements
of Future
Health
Improves
Quality of
Management
Information
Changes
Behaviours
Releases
resources for
value adding
services
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E.2.2 . Group Observations
Culture and behaviours:
Advantages Disadvantages
As Is
Maintains ‘hard working’ culture Staff burn out, fatigue and
disillusionment
Top down Financial risk
No reward for good performance
Lack of management / resource
allocation
Passive resistance to change
Little or no accountability
Decisions based on ‘county jersey’ or
‘it’s my money’
Sense of entitlement
Running to stand still
Mandatory
Delivers significant change, compliance
and uniformity
Creates resistance and fear
People feel more involved in the process Impact on staff morale
Less IR difficulties Reduced flexibility
Promotes staff development
Creates time for value added activity
Clarity and equity
Trust the system to support them
Recommended
Supports ‘consensus’ approach Less impact than mandatory option
Advantages Disadvantages
Less IR challenge Discretionary implementation
Reward system is performance linked Burdensome consultation process –
resource drain
Guidance
People feel more part of the change Little or no change
Wasted effort
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Technology and supporting systems
Advantages Disadvantages
As Is
Existing skill set High cost of maintenance
No capital outlay Too much data validation
Allows intermediate migration without
procurement process
Compliance issues
Doesn’t support changing
structures
Different systems producing
inconsistent data
Mandatory
Consistency of best practice Implementation costs (but builds on
current investment)
Data integrity Staff resistance
Leads to better use of staff resources Lack of suitable in house resources
Standard hierarchies Loss of autonomy at a local level
Aids staff progression
Better compliance and control
Frees up resources from transaction
processing to value added services
Recommended
Empowerment of local management Higher risk of maintaining the as is
environment
No line of sight
Promotes resistance
Only partial improvement of
compliance issues
Advantages Disadvantages
Guidance
May improve the as is situation Weakest option
Little or no improvement
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Skills and capabilities
Advantages Disadvantages
As Is
Assumption / expectations for qualifications Local discretion
Keeps existing staff – great experience Greater risk of financial errors
Local discretion Additional training costs
Risk arising from capability of staff General recruitment for junior grades
– square pegs in round holes
Lack of structured finance for non-
financial managers programme
Lack of structured HSE-wide CPD
programmes
Lack of career progression for
experienced staff without
qualifications
Staff can leave at any time
No succession planning
Mandatory
Good balance of resources –
experience/role/background/skills
Loss of experienced staff
Clear standards for skills requirement No career progression for staff not
qualified
Succession plan Training costs and resources
Clear standards of what elements are
mandatory (key) and recommended (other)
Demarcation issues
Clear and consistent application of financial
regulations and reporting
Loss of morale for staff who can’t
progress because not qualified
Recommended
Local discretion Inconsistent level of skills and
Advantages Disadvantages
qualification
Incentive for staff Lack of consistency in training across
accountants
Better morale
Career path
Encouragement of staff
Guidance
More clarity than as is No consistency at all
Total local discretion – users happy Even greater risks
Structure to career progression
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Governance and controls
Advantages Disadvantages
As Is
Manpower in maintaining as is Diverse cultures
High level awareness of
governance framework
Levels of compliance with governance framework
Maintain current governance
framework
Level of buy-in to governance framework
Meets statutory obligations Political acceptability
Single legal entity No line of sight
Awareness of our fit / gap Unnecessarily time consuming to meet statutory
and other financial deadlines
User perception re impact on their roles
Mandatory
Adds accountability and
ownership
Cost and effort
Enables enforcement Needs very clear process to communicate rules
and processes
Eliminates/minimises
appropriate political influence
Huge training requirements
Clarity
Unambiguousness
Consistency in consequences
Recommended
Softer approach May be appropriate for some things but not for
main fundamental issue
Systems / users may accept
much quicker
Encourages inconsistency
Advantages Disadvantages
More acceptable in a mature,
stable environment
No reliance on financial data
Monitoring more complex
Difficult to ensure implementation of
standardisation
A la carte
Lack of consistency in consequences
More difficult to implement and police
Lack of clarity
Guidance
Users may be very happy with it Throw out existing learning
No consequences
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Information (data governance)
Advantages Disadvantages
As Is
Reflects local ways of working, systems Inconsistent data structures
No line if sight
Promotes inefficiency
Huge inconsistencies
Lack of standardisation
Too much data validation
Huge resources to maintain as sis
Mandatory
Consistency for consolidation Local flexibility in more detailed cost
centres
Single chart of accounts Ability to get agreement
Master data owned and consistent Benefits across multiple systems
Top level cost centre structure to support
aggregation at the element level
Value added reporting due to greater
consistency
Single chart of account element level
consolidation through MI
Fewer codes and feeder systems
Recommended
Only for local requirements, that are not
aggregated
Undermines objective of consistent,
comparable, reliable data
Definitions difficult to enforce
Guidance
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Process
Advantages Disadvantages
As Is
Process reflects local needs, skills,
capabilities and technology
Creates differentiation, complexity in
line of sight and consolidation
Extreme inefficiencies
Waste of resources
Mandatory
More efficient use of resources Could be inflexible – emergency
procedures would be required
Single communication lines Decision support processes need
flexibility – reflecting experience and
management styles
Gives staff feeling of security / assurance Requires people to be trained in
context of organisational changes
Process documented
Guidance manuals
Ensures data that is reliable, consistent
Achieves single line of sight
Creates robust control framework
Internal and external regulations demand
compliance
Transaction processing and compliance
processes should be mandatory for control
and efficiency
Recommended
Allows flexibility in decision support
processes
Would be interpreted as ‘choice’ and
work around developed
Transition (if current systems cannot Inconsistency of approach
support mandatory processes)
Guidance
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E.3 Transaction processing
The Transaction processing option appraisal considered three specific
business challenges and sought the best operating model option to achieve
the desired outcomes, namely:
? How will Finance influence the end to end transaction processes to
ensure that they are simplified standard and consistently followed?
? What is the best way to ensure effective information management
and data governance across the system?
? Our goal is a single financial system. What is the most efficient
and cost effective way of getting there?
The appraisal compared the current position, or As Is against a number of
alternative operating model options.
Operating model options
Operations excellence within finance (i.e. the future requirements from transaction
processing will be delivered through shared services)
Operations excellence outside finance (i.e. the future requirements from
transaction processing will be delivered through National Shared Services)
Delivered within the Business (i.e. the future requirements from transaction
processing will be delivered locally by HSCPs, including through self service)
Outsource Transaction Processing (i.e. the future processing requirements from
transaction processing will be delivered through an external partner).
Outsource Financial Systems (i.e. the future financial systems requirements will be
delivered through an external partner).
A group discussion captured the advantages and disadvantages arising
from mandating aspects of the operating model, then each option was
scored to determine the preferred option
Evaluation criteria applied were:
? Alignment with design principles
? Meets requirements of Future Health
? Improves quality of management information
? Changes behaviours
? Releases resources for value-added services
? Deliverability: capability, capacity, affordability and risk.
E.3.1 Recommendations and scoring
The appraisal concluded the following:
? Technology should be outsourced (managed service)
? Information (data governance) should be owned and managed by
finance
? Process should be delivered by National Shared Services
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Finance Operating Model
Options Appraisal: Transaction processing
Average for all Groups
Option A B C D E F Total
Process
As Is 0.67 0.00 0.33 0.33 0.33 0.67 2.33
Operations Excellence within Finance 1.67 1.67 2.33 2.33 2.00 3.00 13.00
Operations Excellence within NSS 5.00 5.00 4.33 4.33 4.33 3.00 26.00
Business / Self-Service
Outsource: Process 4.33 5.00 3.67 4.33 5.00 1.00 26.00
Information (data governance)
As Is 0.33 0.00 0.33 0.67 1.33 1.33 4.00
Operations Excellence within Finance 5.00 5.00 5.00 4.33 3.67 3.67 26.67
Operations Excellence within NSS 3.67 3.67 3.67 2.33 3.67 2.33 19.33
Business / Self-Service
Outsource: Process
Technology (systems)
As Is 1.33 1.33 1.33 1.00 0.33 0.33 5.67
Operations Excellence within Finance
Operations Excellence within NSS 3.67 4.33 3.67 1.67 3.00 2.33 18.67
Outsource: Systems 3.67 3.67 3.67 2.33 3.67 2.67 19.67
Alignment
with Design
Principles
Meets
requirements
of Future
Health
Improves
Quality of
Management
Information
Changes
Behaviours
Releases
resources for
value adding
services
Deliverability:
Capability,
Capacity,
Affordability &
Risk Total Score
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E.3.2 Group Observations
Technology
Advantages Disadvantages
As Is
Unique to HSE Efficiencies not maximised
New common system delivered Higher support costs
Less risk Processes not changed – inefficiencies
continue
Improved processes and
information
Local fixes
Better security More expensive to maintain
Staff morale improved Shared services strategy not supported
Online / self-service No upgrades since 1999 – customised
Facilitates standard ways of
working
Unlikely to deliver objectives e.g. common
chart of accounts
Duplication
Multiple support
National shared services
Addresses weaknesses in as is Staff expertise and resources – affordability
Improved governance Cost and effort to maintain and implement
upgrades
Single owner Investment in back up procedures
Control over development Not a core function
In house capability and knowledge
Security
Outsource
Reduced costs Data protection risks
Advantages Disadvantages
Maintained versions Reliance
Access to expertise Premium cost
Risk transferred Cost of change – transparency
Effective use of expertise Is there a provider big enough?
Access to new technology /
innovation
Contract management
Greater flexibility IR issues?
Sign off / approval may be easier Loss of control
Free up resources – systems
administration
Response times to problems
Pace for implementation
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Information (data governance)
Examples of data are:
Chart of accounts: GL: care group,
cost centre, subjective, project
Commodity codes –
national codes
Vendor master -
procurement and AP
Customer master - income Employee master:
HR and payroll
AFS/IMR/monthly
reporting
COMPSTAT – not finance DRG/patient level
costing – not finance
Fair deal reports /
occupancy
Payroll pay groups / pay scales
Advantages Disadvantages
As Is
Producing reports, meeting deadlines, paying
suppliers – works but creaking
Can’t change in line with future
Too many systems
Line of sight
Complex touch points – not
automated and takes too long
Changes take significant effort
Too much manual intervention
Lack of comparability
Operations excellence in Finance
More aligned with finance Need for engagement
Governance easier to mandate Ability for NSS to deliver if not
Advantages Disadvantages
involving them in the change
Efficiencies / standardised process
Less duplication
Operations excellence in NSS
Co-ownership of data and process Time delay on decision making if
not part of finance
Different organisations – will be a
challenge
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Process
Advantages Disadvantages
As Is
Known Labour intensive
No up-front investment required or risk from
change
No line of sight
No disruption Lacks consistency
Resource inefficiency
Won’t cope with new structures
Duplication
Not sustainable
Resource intensive
Not sustainable
Dependency on local knowledge
Expensive
Operations Excellence - Finance
Speed – decision making, access to staff, local
knowledge, more control and flexibility
Risk of regional ad hoc regional
development
Lack of standardisation
Duplication / cost
Less local control
Lack of national view –
consistency and comparability
HR / procurement interface –
lack of integration
Operations excellence in NSS
Standardisation Risk in bigger project
Advantages Disadvantages
Consistency / comparability IR issues
Line of sight Up- front investment
Resource savings / cost benefit over time Loss of local knowledge
Opportunity to scale up Time to implement
Lower delivery risk Availability of resources
Control and compliance Investment in training
Easier to audit
More control over front end
Staff development / career path
Expertise
Quality of service
Business / self-service
Part of has to be in the business but needs
automation and control
Loss of control
Implementation risk
Operational risk
Technology access
Outsourcing
Speed of start up Loss of knowledge and control
Economies of scale Risk of cost escalation due to
lock in
Release people IR issues
Security of service provision Data security
Should be cheaper Need to make staff redundant /
TUPE to achieve savings
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Advantages Disadvantages
Leading edge technology Loss of expertise in provider –
staff turnover
Sustainability and capacity Not current good practice
Not core business
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E.4 Business Partners
During the option appraisal workshop participants considered the three
business partner roles proposed to deliver Decision Support in the new
operating model, exploring advantages and disadvantages, and
appropriateness for the Irish health system.
Commissioning Business Partners
? Commissioning Business Partners work alongside the National
Directors. Responsibilities include:
– reform and delivery of services in their specified service domain;
– the development of national service strategies; and strategic
commissioning frameworks for their areas of responsibility.
The Commissioning Business Partner is the face of finance for the National
Directors and will be part of the National Director team. The role is forward
looking, engaging business intelligence, finance specialists and operations
to develop scenario plans and business cases. In doing so, the Business
Partner is acting as the representative of the CFO.
Commissioning business partners are proposed on the assumptions that
commissioning is led by National Directors; there will be an SLA between
finance and the National Directors; trusted financial and activity data is
available; finance business partners have a care group focus but report to
the CFO; and finance business partners are appropriately trained and
resourced. On this basis, the advantages and disadvantages of this
business partner role are:
Advantages Disadvantages
Finance has a meaningful value added
role
May have conflicts to manage between
finance and service priorities
On balance, the recommendation is that commissioning business partners
are appointed to mirror the National Director roles.
Performance Business Partners
? Performance Business Partners work with the COO and RDPIs in
supporting the planning and performance management process. The
Performance Business Partner is part of a multi-disciplinary Planning &
Performance team.
? The Performance Business Partner receives a regional view of care
group data from Operations Excellence and holds reviews with the
HSCPs in their region.
? The Performance Business Partner provides monitoring and evaluation
support for their area overall and for each care group, acting as a
representative of the CFO;
Performance business partners are proposed since they will enhance
regional service planning. The Working Group argued that these business
partners need to be appointed quickly to make an impact; that their
effectiveness will be influenced by the quality of information and systems in
place; and that their role has to be more than number crunchers. On this
basis, the advantages and disadvantages of this business partner role are:
Advantages Disadvantages
Consistency of performance
management
There will be variation in effectiveness
during transition to the new finance
operating model
Standardisation of reports to facilitate a
national view
Will take time for a broader perspective
to be embedded
Shifts focus to the service – finance only
one aspect
Improves trust – not just a finance hat
on
On balance, the recommendation is that Performance business partners
are appointed to mirror the RDPI roles.
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Operational Business Partners
? Operational Business Partners provide decision support activities within
HSCPs, and are responsible for ensuring appropriate financial
management practices are in place to support effective financial control
and sound decision making at a local level.
Operational business partners are proposed with the following assumptions:
there are strategic local decisions but these are made in the context of
national care group strategy; in the context of a changing environment,
finance needs to take control of the agenda and shape how finance services
will be provided; support can adapt to multiple reporting relationships and be
supported by multi-dimensional reporting. On this basis, the advantages and
disadvantages of this business partner role are:
Advantages Disadvantages
Deep knowledge of local operations
through integration with operational staff
Going ‘native’ – driven by local agenda
Dedicated resources aligned to
operations structure
Meeting corporate objectives depends
upon operations working effectively with
finance business partners. Changing
role of Group CFO and move to MFTP
should help
HSCP CEO has access to a local
business partner
On balance, the recommendation is that operational financial support
business partners are appointed to mirror the HSCP CEO (or equivalent)
and HSCP functional director (or equivalent) roles.
They will be the Finance Director of each HSCP and will have professional
accountability to the CFO.
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We recommend a service delivery model that comprises business partners,
finance specialists and operations excellence.
The academic basis for this delivery model is the HR model developed by
Dave Ulrich of Ross School of Business at the University of Michigan. Ulrich
introduced the concepts of three business components: business partners,
centres of expertise and shared services.
The way in which HR is structured to deliver its services has been the
subject of considerable debate and discussion over recent years. What
emerges from the literature are two approaches to HR organisation:
? traditional approaches of a single team of generalists, specialists
and administration, or a corporate strategy team aligned by
business units or locations
? the ‘three-legged stool’ Ulrich model of business partners, centres
of expertise and shared services.
Research has found that a traditional structure of HR services is still
common in many organisations and is particularly prevalent in small and
medium sized organisations. This is due to the fact that because of
resource constraints, HR teams in SMEs have to be versatile and deal with
both the strategic and the operational work.
Over recent years it has been Ulrich’s model of human resource services
delivery which has become regarded as best practice. The most common
interpretation of the model is based on three means or mechanisms of
service delivery: HR business partners, HR centres of expertise and shared
HR services. In the 2006 Chartered Institute of Personnel Development
survey, 83% of organisations reported that they had introduced Ulrich’s
business partner model in some way (these organisations would mainly be
large scale).
Although initially developed for HR services, the principles of the Ulrich
model apply equally well to other support services such as finance.
Accountancy bodies and international consultancies have endorsed the
Ulrich model as best practice and it is widely adopted in large scale public
and private organisations.
F ORGANISATION DESIGN
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The shared services leg of the model has developed over the period since
the Ulrich model was first put forward. Leading practice now is for an
integrated shared services model that goes beyond transaction processing
into added value accounting and knowledge-based services. The latter has
been facilitated by new developments in business intelligence systems. In
PA, we refer to this broader role as operations excellence.
Having established the core attributes of the operating model, the next step
is to determine the services to be supported in each area by considering the
characteristics of each service.
Finance Service
Business Partner Finance
Specialist
Operations
Excellence
Decision support
Programme
financial
management and
reporting
?
Operational
budgeting
?
Operational
financial
management and
reporting
?
Cost containment
planning
?
Costing
?
Provision of
financial advice
?
Financial strategy
and planning
?
Corporate
budgeting
?
Corporate financial
management and
reporting
?
Business Partners
Finance
Specialists
Operations
Excellence
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Finance Service
Business Partner Finance
Specialist
Operations
Excellence
Value for money
?
Compliance
Governance and
controls
?
Financial
statements
?
Treasury / Vote
?
Capital accounting
?
Financial risk
management and
insurance
?
Taxation
?
Period end closure
?
Cash management
?
Systems support
?
Transaction
processing
Order to receive
?
Invoice approval to
payment
?
Finance Service
Business Partner Finance
Specialist
Operations
Excellence
Payroll changes
?
Payroll processing
?
Private health
claims
?
RTA claims
?
A&E cost recovery
?
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Business intelligence is a key enabler for the role of the business partner.
Typically, business intelligence involves the following ‘layers’:
? Information users – finance’s key stakeholders
? Management – business intelligence strategy to ensure that
business needs are being met; data governance to ensure
consistency of data definitions and data ownership; architecture
and software to advise on the most appropriate technology
solutions
? Business intelligence competency centre(s) – data warehouse and
analytical capability
? Operational systems – the source data for the data warehouse.
The term business intelligence is often used to describe the technical
architecture of systems that extract, assemble, store and access data to
provide reports and analysis. It can also be used to describe the reporting
and analysis applications or performance management tools. But business
intelligence is not just about hardware and software. It is also about
organisation wide recognition that an organisation’s data is an important
strategic asset that can yield valuable management information that can be
used to support decision making.
Leading businesses are investing in business intelligence (BI) solutions to
secure improved performance management. There is a commonly held
belief that investing in an improved BI solution, to deliver a ‘single version of
the truth’, will enable better decision making and improve performance
management. To be successful, investment in BI has to be well co-
ordinated, strategic and avoid ‘single issue’ deployments that lead to an
array of local solutions. Establishing a business intelligence competency
centre enables a common approach which yields better value for money.
The common solution must address the needs of specific business
communities to avoid these groups finding solutions of their own and avoid
replicating similar functions within these groups.
To establish a BICC that is seen as a ‘must have’ capability, it has to have
business analytical functions at its heart. This will help the service to look
beyond data integration and technology and to focus on delivering critical
business insights. The BICC provides the information used to support
Operational systems
Business Intelligence Competency Centre(s)
• Data warehouse
• Analytical capability
Business Intelligence
Strategy
Data governance
Architecture and
software
Information users – National Directors, RDPIs, H&SCPs
G BUSINESS INTELLIGENCE
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decision making across the business. BICC resources will be
knowledgeable about the business. This service will support the
management team by providing not only the vital performance measures
they need, but also new and challenging views of the business and
operations; views that stimulate debate and fresh thinking at the senior
management table.
Developing a BI function is an evolutionary process in which all aspects of
the capability need to develop in balance:
? The BI capability will bring together key stakeholder requirements
(demand) and available data sources (supply) through a balanced
mix of people, processes and technology
Both information needs and data sources are undergoing significant change.
To satisfy the changing information needs and understand the potential of
the new data sources, the BI capability needs to evolve with these changes
Explore
possibilities
Focus on
Needs
Technology
Process
People
Information needs
(what information is required by key
stakeholders))
People
(organisation, skills and culture)
Process
(operating, discovery, change, quality control)
Technology
(technical architecture, tools for data
management, processing and quality, reports
and analysis, workflow)
Data
(line of business systems, other sources:
internal/external, structured/unstructured,
master data) S
u
p
p
l
y
D
e
m
a
n
d
How clear is the HSE about the questions
that need answering, now and in the
future? What are the priorities?
Is the value of data engrained at all levels,
do people trust and understand the data,
do they have the skills to work the tools?
Do the processes effectively allow to
maintain and improve the value delivered
from the data assets?
Can the tools support the current and
future requirements and skills for use,
discovery and maintenance?
Is there a single version of the truth, what’s
data quality like, are all relevant sources
available, how easily are new sources
discovered and added?
B
I
C
a
p
a
b
i
l
i
t
y
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The primary challenge with the current collection of systems is that they pre-
date 2005 and the establishment of the HSE. CRS or Corporate Reporting
Solution was implemented in 2006 in response to an urgent need to give
one ‘health view’ and to better enable the organisation to monitor and
respond to a changing system. Given the size of the new organisation it was
thought best to quickly develop a bespoke consolidation tool to provide a
system wide view from a common platform using existing systems
architectures as a base. It was never envisaged as a long term solution but
in spite of this has been expanded and mimicked in many forms as new
reporting pressure points have emerged over the years.
In the absence of a single financial system there has never been an impetus
to expand Corporate or local financial systems beyond the one view, a
financial and hierarchical view of the organisation. Although HR and
Procurement systems exist in many forms there has never been a single
view of these functions. Local systems are fragmented and differ in quality,
size and scope depending on where they sit geographically. The majority of
these systems date back to the Area Health Boards and although new
systems have been developed and old systems modernised there has been
no real commonality of approach to the financial systems that are used on
the ground.
In addition voluntary providers are incorporated into the HSE’s reporting at a
very high level. We are heavily dependent on provider trust because of a
lack of line of sight into each provider’s ledger. This is further complicated
with each having separate legal status and distinct governance structures.
Each of these organisations has developed their own systems in the
absence of an integrated approach.
The primary weakness in financial systems is their inability to provide
multiple views of the same data. The organisation is now finding itself
increasingly compelled to report using a matrix style view including areas
such as care groups / programmes, hospital groups, redefined ISA’s and
other emerging but as yet unspecified organisational changes. The HSE is
also in the unique position of having a dual reporting arrangement with
Government, reporting on a UK GAAP basis in addition to adhering to Vote
accounting rules and regulations. Systems were developed for Vote
Accounting to provide a high level view but that aside existing financial
systems cannot provide a detailed dual view of the organisations finances.
Whilst it is acknowledged that existing Corporate systems can be
reconfigured to support most of the above at a high level it is questionable
whether all local systems which are primarily functionally driven i.e. by
hospital / LHO and also report on strictly drawn geographical / old Area
Health Board boundaries will be able to respond to this fundamental change
in how to manage our business. Corporate systems are heavily dependent
on the systems that feed them and although with development they can
present data in a matrix form what they lack is the necessary integration with
local finance, HR and Procurement systems which would be deemed a
necessity in a rapidly changing organisation
H SENIOR FINANCE TEAM VIEW OF
CURRENT INFORMATION SYSTEMS
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A substantial number of HSE staff were involved in shaping the recommendations contained in this report. We appreciate their contribution.
Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Anne Kennedy
? ?
Ann-Marie McGill
?
Barry White
?
Bernie Hyland
?
Brian Donovan
?
Colum Maddox
? ?
Cormac Maloney
?
Damian Casey
? ?
David Slevin
?
Declan Lyons
?
I KEY STAKEHOLDERS CONSULTED
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Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Donal Foran
?
Eddie Hogan
?
Ger O’Mahony
?
Geraldine Smith
?
Gerry Greville
?
Helen Kilbane
?
Hilary Murphy
?
Ian Murray
?
Jane Carolan
?
Jennifer
O'Callaghan
?
Jim Hussey
?
Jim O’Sullivan
?
Joe Sheeky
?
John Canny
?
John Leech
? ?
John Swords
?
Kevin Finnan
?
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Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Leonard Clinton
?
Liam Minihan
?
Liam Woods
?
Lonan Durand
?
Margaret Tobin
?
Mark Fagan
? ?
Mary Guinan
?
Maureen Cronin
?
Maurice Power
?
Michael Flynn
?
Michael Lane
?
Michael Morrow
?
Michael O'Keefe
?
Michelle Brennan
?
Noelle Dineen
?
Orla Dooley
?
Paddy McDonald
? ?
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Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Raymonde
O'Sullivan
?
Roger Hynes
?
Sean McNamara
?
Sean Redmond
?
Sharon Hickey
?
Simon Moores
?
Simon Murtagh
?
Stephen Mulvany
?
Tadhg Costello
?
Tom Byrne
?
Triona Downey
?
Valerie Plant
? ?
Vourneen O'Connor
?
Yvonne O'Neill
? ?
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CONFIDENTIAL – between PA and The Health Service Executive
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doc_552530155.pdf
The new Finance Operating Model for Health in Ireland will support far reaching and fundamental change in financial management practice and will be an important enabler of wider Systems Reform.
CONFIDENTIAL – between PA and The Health Service Executive
DEFINING FINANCIAL
MANAGEMENT
A Finance Operating Model for Health
in Ireland
30 August 2013
FINAL REPORT
CONFIDENTIAL – between PA and The Health Service Executive
PA Regional Office:
PA Consulting Group
2nd Floor, Embassy House
Herbert Park Lane
Ballsbridge
Dublin 4
Tel: +353 1 6684346
Fax: +353 1 6681771
www.paconsulting.com
Prepared by: PA Consulting Version no: 1.0
3
CONFIDENTIAL – between PA and The Health Service Executive
The new Finance Operating Model for Health in Ireland will
support far reaching and fundamental change in financial
management practice and will be an important enabler of
wider Systems Reform. Underpinned by a single
integrated financial management system and a mandated
financial management framework, these changes will
ensure financial stability within a reformed health system
and will drive a culture of collective responsibility and cost
consciousness.
This report recommends a new Operating Model for
Finance and seeks approval to progress with Phase 2 of
the Finance Reform programme as outlined in the
Implementation Strategy with immediate effect.
The future sustainability of healthcare funding
remains a key Government priority
The economic crisis has had a profound impact on public services in Ireland.
The Government’s efforts to manage public expenditure in line with
commitments made to the Troika has seen budget reductions in Health of
€3.3bn (22%) since 2008.
Staffing levels have reduced by over 11,268 WTEs since the peak
employment levels in September 2007. Health services continue to
experience very significant budgetary challenges alongside increased
demands for services.
Budget overspends during 2012 prompted external reviews into financial
management practices in Health, and managing Health finances became a
priority for the Troika in ensuring the future economic stability of the country.
The Programme for Government will drive significant changes to the way
health services are managed and delivered to ensure:
? A public health service that is leaner, more efficient and better integrated
to deliver maximum value for money and respond to public needs; and
? Continuity of service delivery in the context of significantly reduced staff
numbers.
In November 2012, the Minister for Health published Future Health: A
Strategic Framework for Reform of the Health Service 2012 – 2015),
outlining the main healthcare reforms that will be introduced in the coming
years as key building blocks for the introduction of Universal Health
Insurance in 2016.
Future Health seeks to support innovative models of care delivery and in
particular integrated care pathways. All this must be achieved under the
most stringent fiscal constraints experienced for decades and cognisant of
health trends and drivers of change such as:
EXECUTIVE SUMMARY
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CONFIDENTIAL – between PA and The Health Service Executive
? Demographic change;
? New medical technologies, health informatics and telemedicine;
? Rising expectations and demands; and
? Spiralling costs of healthcare provision.
? Health services in Ireland face the dual challenge of reducing costs whilst
improving outcomes for patients. In these circumstances the need for
strong, effective financial management is of paramount importance.
There is a clear consensus for the need for change
The review of current financial management arrangements secured
consensus amongst the finance community that the current operating model
is no longer fit for purpose. There are three distinct drivers for change in the
financial management practices within the health system in Ireland, and
these are considered below:
The current operating model is no longer fit for purpose
Reports by Ogden and PA during 2012 identified significant weaknesses in
financial management practices.
We have worked closely with the finance community to understand current
ways of working and have found many examples of good practice, achieved
in spite of variations in processes, multiple financial systems and limited
engagement with the voluntary sector.
However it was clear that current practice was not fit for purpose and is
characterised by:
? Inconsistency in the level and standards of service provided to different
customer groups across the system;
? The extent of financial management activity being supported by teams
with no direct accountability or responsibility to the CFO;
? The extent of process variation, inconsistent data definitions and multiple
finance systems in place inhibit the ability of staff involved in decision
support and compliance to make best use of their skills and expertise;
? Effectiveness of decision support being compromised by time spent
validating and manipulating data to meet information requirements of
customers;
? A lack of shared ownership of transaction processes – finance, HR and
procurement results in duplication and inconsistency in processes and a
lack of integration;
? Significant under-investment in technology which has compromised the
ability of finance to improve current working practices;
? Weak accountability for actions and recognition that financial
management is a corporate responsibility undermines the controlling role
of finance; and
? A lack of investment in training and development of both finance staff
and budget holders to ensure that they discharge their financial
management responsibilities effectively.
The current financial management framework does not
support the CFO’s responsibilities and accountabilities
The Health Service Executive (Governance) Act, 2013 strengthens the
accountability arrangements between the HSE and the Government. The
role of CFO was introduced to support these new accountability
arrangements.
The CFO’s appointment sends a clear statement of intent to stakeholders
that steps will be taken to improve confidence in financial management
practices and to achieve greater financial control.
The CFO has accountability for financial management across the entire
health system. To discharge that accountability the CFO must ensure that
the financial management framework enables him to deliver against all four
facets of his role:
? Stewardship and accountability: ensuring the compliance framework is in
place to provide a true and fair view, that builds trust in the financial
information provided;
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CONFIDENTIAL – between PA and The Health Service Executive
? Financial Management: ensuring practices across the system inform
decision making, promote probity and value for money and a culture of
cost consciousness and continuous improvement;
? Corporate Leadership: as a Board member providing strategic direction,
effective corporate governance and building strong relationships; and
? Professional Leadership: driving professional standards, leading the
profession and building capability across the system.
? The current operating model does not provide the CFO with the
adequate tools to discharge this responsibility.
The fundamental changes in healthcare heralded by Future
Health bring new requirements which current practices
cannot support
The long term changes in Ireland’s health system, as described in Future
Health have significant implications for finance.
The introduction of Money Follows the Patient (MFTP) and ultimately
Universal Health Insurance (UHI) will fundamentally change the financing
system requiring:
? The creation of new organisational entities to support commissioning,
tariff setting, pricing & payment and service regulation;
? A fundamental change in the relationship between the Department of
Health, these new organisational entities and Health and Social Care
Providers (HSCPs);
? A change in culture and behaviour amongst HSCPs particularly in
financial management, so that they understand the cost of service
provision by procedure, and have the ability to operate effectively in a
commissioning environment which defines services to be provided and
the payment streams for these services, and
? The development of a new relationship between the Insurance sector in
Ireland and the Health system together with a supporting infrastructure to
underpin the mechanics of UHI.
Whilst finance has traditionally found innovative solutions to new
requirements, the consensus reached is that the current operating model
cannot effectively respond to these changes. The success of health reform
is fundamentally dependent on having a transformed approach to Financial
Management.
The scope and scale of change required presents
a significant challenge to the system
It is important to recognise the flexibility, professionalism and commitment of
the finance team in the way that they work within current structural and
systems constraints to support financial management across the system.
Phase 1 of the Finance Reform Programme has made a significant impact in
tackling specific challenges in service planning, budgeting and cost-
containment, and it should also be recognised that this added to the
workload of an already stretched finance team. There is tangible evidence of
change fatigue in the system which will potentially impact on the pace of
change.
The challenge facing the HSE is how best transform financial management
during a period of unprecedented change across the healthcare system.
There is a need to build on what has been achieved in recent months and to
deliver an approach to financial management that secures medium term
stability and cost containment while allowing sufficient flexibility to support
the reforms under the vision for Future Health.
Critical to success will be:
? Demonstrating intent and ability to deliver;
? Securing timely approvals for any investment;
? Addressing workforce issues effectively; and
? Resourcing the programme properly using key finance staff and external
support where required.
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A new operating model for Finance will drive real
change over an extended period
This report defines a new Finance Operating model for Health in Ireland,
which addresses the challenges of current financial management practice,
and is capable of meeting the future needs of a dynamic and complex health
environment.
This will fundamentally transform finance from being a reactive, disjointed,
reporting function into a proactive, coherent decision support capability,
adding value at all levels of the business at a significantly reduced cost.
The model builds on leading practice principles to ensure the CFO’s
responsibilities and accountabilities for financial management are delivered,
and the desired changes in behaviours amongst both finance staff and
budget holders drive the improvements in financial management practices
required. The CFO will:
? Define the financial management framework to be followed ;
? Provide trusted and timely information to support decision making, in a
standard and consistent way
? Inform strategic and operational decision making through trusted
professional advice, insightful analysis and decision support; and
? Ensure expected standards are maintained through effective compliance
and performance management.
The model is underpinned by a commitment to develop the financial
management capability of both finance staff and budget holders to build a
cost-consciousness culture and change behaviours across the system.
A service delivery model reflecting leading practice
Finance will provide a consistent and appropriate level of service to all users
reflecting user requirements and focused on improving the quality of
financial management and enabling informed decision making.
This will be achieved through a service delivery model comprising three
distinct components as illustrated in the figure below:
? Operations Excellence: the ‘finance engine room’ which will ensure that
the infrastructure is in place to deliver financial reporting and transaction
processing effectively and efficiently;
? Finance Specialists: deep technical skills and expertise providing a
single point of contact for expert advice; and
? Business Partners: supporting financial management decision making
and promoting a culture of financial responsibility across the system by
working closely with the business at a strategic, national and operational
level.
Process, Governance and Controls to demonstrate
effective financial management practices
The CFO will define the financial management framework which is
mandated across the health system. This will define the process,
governance and controls required to demonstrate effective financial
management practice
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In practice that means:
? Processes are standardised, simplified and automated wherever possible
? Clear line of sight from a national consolidated position to a functional
business unit level is possible for all areas of expenditure
? Controls and rules are embedded within systems and guidance on their
application is available in a user friendly format online
? Governance and controls are mandated
? The CFO owns all end to end financial management processes
Information systems providing trusted management information
We recognise that technology is a key enabler of change and the successful
implementation of the new model is dependent on technology.
In practice that means:
? A single financial management system supporting HR, Procurement and
Finance processes will be deployed across the health system
? A national system to support patient level costing and tariff pricing
? Information and data governance to be owned by CFO
? A single version of the truth
? Trust in data
? Information to be collected once and used many times with financial
reporting and data analytics being delivered in a standardised, consistent
way to all users through Operations Excellence
A commitment has been made to introduce new financial systems for Health
within the Memorandum of Understanding between Government and the
Troika. Our plan to implement a new operating model for Finance provides
the means to deliver against this commitment.
Developing the Skills and Capabilities of all our people
The necessary changes in financial management practice rely upon
changes in behaviours from those involved across the system.
There is a requirement to invest significantly in building skills and
capabilities to support these changes.
In practice this means:
? Skills and capabilities mandated for key finance roles
? Continued Professional Development (CPD) compulsory for all finance
professionals
? CFO “head of profession” to improve standards and quality of financial
advice
? Learning and development for both finance professionals and non-
financial managers to be recommended and supported by CFO.
The model will be supported by a high level organisational structure as
follows:
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An incremental approach to change
The future operating model for Finance is only achievable if the following
components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and facilitating
effective self-service principles;
? Trusted financial management information which supports effective
decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance management
arrangements which reward good practices and provide sanction where
appropriate
The Finance Reform Programme will deliver these components over time,
but is a need to change the structures and operating model for Finance to
support the system during this transition period. This will support the delivery
of the Finance Reform programme whilst ensuring that systems of financial
control remain robust and effective during transition.
This is particularly important given:
? Many commissioned reports, including the C & AG Audit show that the
current financial systems are not fit for purpose;
? The recent establishment of ‘National Directors’ and the immediate
necessity to prepare financial systems to support their requirements; and
? The overall transition, in the next few months, from the current reporting
structures and the need for continuity of financial reporting through this
change, while ensuring financial integrity.
The diagram below illustrates the implementation strategy.
Step 1: Interim Structure
An interim structure will be introduced from 1 October 2013 for a period of
6-9 months. This will enable the CFO signal to the system that changes are
underway, and will allow the Finance Specialist and Operational Excellence
functions to be established. It will also support the consolidation of regional
finance operations into two units as an initial step towards Business
Partnering. The move to Step 2 can take place when the following
conditions are in place:
? ISA review outcome is known;
? Interim BI reporting solution in place;
? New system requirements defined; and
? The future role of Shared Services is confirmed.
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Step 2 – Transitional Operating Model
The Transitional Operating Model is designed to support the implementation
of the key change initiatives required to deliver the new Operating model
over time whilst continuing to support business as usual.
The Business Partner model will be introduced, and decision support
services to support commissioning and performance management will be
developed; and the implementation of financial management arrangements
within HSCPs supported.
The transitional operating model will be supported by the following high level
organisation structure:
These are key leadership roles within Finance and those in these posts will
have clear responsibilities for both service delivery and reform. They will
have a clear change management role, and will need supported and
developed to deliver that role effectively.
The Implementation Challenge
The scope and scale of the implementation challenge should not be
underestimated, and it is important to recognise that the Future Health
milestones will drive the pace of change.
Our work has secured significant consensus amongst the finance
community both of the need to change, and that the proposed model is the
right one to deliver the changes in financial management practices sought.
We have secured commitment and buy-in to make these changes a reality.
A quarterly milestone plan to support the next twelve months has been
developed as part of a three year change programme.
The plan identifies the need for significant and positive action in the
immediate months ahead and the success of the overall programme will
likely be defined by these actions.
Key activities include:
? Initiating Phase 2 of the Finance Reform Programme and mobilising the
delivery teams;
? Developing the business case for managed service to provide a single
integrated financial management system;
? Designing common chart of accounts, data standards and defining
system requirements;
? Developing interim BI reporting;
? The design of transitional and final organisation structures, roles and
person specifications; and
? Initiating procurement of managed service to provide a single integrated
financial management system.
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EXECUTIVE SUMMARY 3
The future sustainability of healthcare funding remains a key
Government priority 3
There is a clear consensus for the need for change 4
The scope and scale of change required presents a significant
challenge to the system 5
A new operating model for Finance will drive real change over an
extended period 6
An incremental approach to change 8
The Implementation Challenge 9
1 INTRODUCTION 14
1.1 Background and context 14
1.2 The Finance Reform Programme 14
1.3 How an operating model will support the scope and scale of
change required 15
1.4 Our Approach 16
1.5 Structure of the report 16
2 THE CURRENT SHAPE OF FINANCE 18
2.1 The Current Finance Operating Model 18
2.2 Information and technology 24
2.3 Inconsistency in support levels and standards 27
2.4 The provider landscape 27
2.5 The cost of finance 28
2.6 Strengths to build on and areas for development 32
3 HOW FINANCE NEEDS TO CHANGE 33
3.1 Drivers of Change 33
3.2 How Finance functions in other organisations are transforming 46
3.3 Requirements for change across the finance operating model
for health in Ireland 51
4 OPTIONS APPRAISAL 54
4.1 Our approach to options appraisal 54
4.2 Defining the Financial Management Framework 54
4.3 Delivering effective transaction processing 55
4.4 Addressing line management and accountability in Business
Partnering 56
4.5 Conclusion and recommended way forward 57
5 NEW FINANCE OPERATING MODEL FOR HEALTH IN
IRELAND 58
5.1 Purpose 58
5.2 Vision and Design Principles 58
5.3 A new Finance operating model 59
CONTENTS
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6 IMPLEMENTATION STRATEGY 69
6.1 Essential components of the new operating model 69
6.2 An incremental approach to change 70
6.3 Step 1: An interim organisational structure 70
6.4 Step 2: A transitional operating model 70
6.5 Implementation success factors 76
6.6 Implementation plan 78
6.7 Planned Outcomes: Year 1 86
6.8 Critical Success Factors 89
7 CONCLUSIONS 90
APPENDICES 91
A SHAPE OF FINANCE 92
A.1 Introduction 92
A.2 Process analysis 93
A.3 Duplication of process activities 94
A.4 Fragmentation 97
A.5 Activity profile of core processes 97
A.6 Cost Analysis 98
A.7 Grade Analysis 104
B TRAINING NEEDS ANALYSIS 111
B.1 Introduction 111
C EMERGING HOSPITAL GROUPS 115
C.1 Introduction 115
C.2 The emerging group structures 115
C.3 Steps towards a new operating model 116
C.4 Dublin East 117
117
C.5 South / South West 118
118
C.6 Dublin North East 119
C.7 Dublin Midlands 120
C.8 West / North West 121
C.9 Mid West 122
D CASE STUDIES 123
D.1 Business partnering 123
D.2 Shared services 126
D.3 Big Data 126
E OPTIONS APPRAISAL 129
E.1 Introduction 129
E.2 Compliance 129
E.3 Transaction processing 137
E.4 Business Partners 143
F ORGANISATION DESIGN 145
G BUSINESS INTELLIGENCE 148
H SENIOR FINANCE TEAM VIEW OF CURRENT
INFORMATION SYSTEMS 150
I KEY STAKEHOLDERS CONSULTED 151
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FIGURES
Figure 1: Finance Operating Model 16
Figure 2: The Current Operating Model 20
Figure 3: The current shape of Finance in the HSE 22
Figure 4: The variation in support across the statutory and
voluntary sector 27
Figure 5: The Role of the CFO 37
Figure 6: The differing roles of operational and financial
managers in the context of budgetary control 38
Figure 7: The Emerging Landscape 40
Figure 8: The Commissioning Wheel for the NHS 42
Figure 9: The planning and operational processes that could
follow from the MFTP 44
Figure 10: How leading organisations have transformed their
finance operations 46
Figure 11 The new operating model for Finance 60
Figure 12: The New Service Delivery Model 61
Figure 13: Business Partnering Roles 65
Figure 14: Organisation Structure 66
Figure 15 The transition steps towards a future operating model 70
Figure 16 The interim organisational structure 70
Figure 17 The transitional operating model for Finance 72
Figure 18 Transitional Management Structure 73
Figure 19 High level road map 79
Figure 20: WTE by core and non-core finance processes 93
Figure 21: The Current and Future shape of Finance 93
Figure 22: Compliance 94
Figure 23: Transaction Processing 94
Figure 24: Decision Support 96
Figure 25: Decision Support 97
Figure 26 Compliance 98
Figure 27: Transaction Processing 98
Figure 28: Cost versus time as a % total (excluding non-core) 100
Figure 29: Analysis of grade by process 104
Figure 30: % of time spent on activities (by grade) 105
Figure 31: Business Partner – Manager 113
Figure 32: Business Partner - Team Member 113
Figure 33: Operations Excellence - Manager 114
Figure 34: Finance Specialist - Manager 114
FIGURES AND TABLES
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TABLES
Table 1 Phase 1 of the Finance Reform Programme 15
Table 2: Current skills and capabilities 26
Table 3: Cost by Finance Service (excluding non-core finance
processes) 28
Table 4: Cost by Finance Activity 29
Table 5: Changes required in financial management practices 52
Table 6: Delivery Options and Evaluation Criteria 55
Table 7: Roles and Responsibilities within the Transitional
Operating Model 74
Table 8: Critical Success Factors 89
Table 9: Cost, WTE and number of locations by activity 99
Table 10: Cost by grade and process 100
Table 11: WTE numbers by grade and process 104
Table 12: Analysis of Respondents by Grade 112
Table 13: Analysis of Respondents by Age, Qualifications &
Experience 112
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A fundamental change in the way that financial
management operates across the health system in Ireland
is essential to underpin the reform envisaged in Future
Health and to address recognised weaknesses in current
financial management systems and infrastructure. This
change goes beyond the need for new systems and
processes and requires a positive response from both
finance professionals and non-financial managers,
recognising new roles and owning their budget
management responsibilities. A new operating model
provides the blueprint design to shape that change
ensuring alignment with desired outcomes.
1.1 Background and context
The Health Service in Ireland has embarked on a major programme of
change. Future Health: A Strategic Framework for Reform of the Health
Service 2012-2015 sets out the main healthcare reforms that will be
introduced in the coming years, as key building blocks for the introduction of
Universal Health Insurance in 2016. Future Health will focus on the needs of
the patient even as difficult decisions on health financing are made.
Since the Health Service Executive (HSE)’s establishment, the Finance
function has worked hard to support financial management across the
diversity of the HSE’s services despite the challenges of multiple systems
and many manual, non-standard processes which add complexity and a lack
of transparency and flexibility in reporting.
It has become clear that the current financial management arrangements
will no longer meet the needs of the emerging health system and the
structural change required to support it.
The establishment of hospital groups, new structures for primary care and
community services, the development of formal purchaser / provider
arrangements and the establishment of a Healthcare Commissioning
Agency (HCA) will bring new requirements for financial management, as will
the changing funding arrangements arising from Universal Health Insurance
(UHI). It will also bring about a change in the role of the Department of
Health in the wider health landscape, and a need to build and develop new
relationships across the system. These new relationships will bring new
requirements from a financial management perspective.
1.2 The Finance Reform Programme
The Finance Reform Programme has been established in response to
reports into financial management practice in Health by Ogden and PA
Consulting during 2012. This programme is the beginning of a journey of
change in culture, systems and processes across the organisation that will
1 INTRODUCTION
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transform finance operations. The programme aims to develop more
effective financial planning and management and build a more cost
conscious culture across the Health system by:
? enhancing financial management knowledge, skills and capability both
within Finance and amongst service managers and clinicians;
? securing ownership for financial performance at inter-departmental,
strategic and operational levels by improving service planning, budgeting
and performance management and reporting;
? having a better understanding of the cost of service provision across the
system, which aligns current activity and future demand;
? adopting multi-annual planning and budgeting to support reform and
deliver cost reduction in a sustainable way;
? being clear about responsibility and accountability, and ensuring the
system impact of poor performance is understood and responded to;
? simplifying and standardising systems and processes; and
? ensuring financial management support to services is fit for purpose and
delivered by the right people, in the right place, at the right time.
PA Consulting was appointed to support the Finance Reform Programme in
November 2012. PA supported the programme in a number of key areas
with a view to establishing the foundations of the programme which will be
delivered over time. Work on the finance operating model is one aspect of
this support, as illustrated below.
Table 1 Phase 1 of the Finance Reform Programme
PMO and Programme Management Driving the pace of change and
ensuring a sense of purpose
Service Planning, Budgeting and
Cost Containment
Greater clarity and confidence in 2013
Budget and Service Plan and a new
process for 2014
Performance Management and
Accountability
Establishing the framework to change
behaviours through improved
performance management and
reporting arrangements evidenced over
time through changed behaviours
A new operating model for Finance Building the foundations for
transformation
Financial Strategy, Service
Improvement and Future Health
Building the capability for the future
1.3 How an operating model will support the
scope and scale of change required
An operating model describes how each of the components of a function or
organisation will fit together to deliver an efficient and effective service,
aligned to new requirements. In developing a new operating model for
Finance we will address the weaknesses identified in current systems and
process, and ensure that Finance skills and capabilities are developed to the
extent that the emerging financial management needs of the health system
are met by new ways of working.
This work provides insight into how finance is being delivered across the
health system: nationally, regionally and locally, supporting both statutory
and voluntary service providers. We identify and evaluate alternative options
to deliver finance services to meet emerging future requirements.
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Figure 1: Finance Operating Model
Development of a strong operating model supports a clear understanding
across the organisation of the desired outcome of change initiatives
underway and will ensure that all aspects of the operating model are aligned
and support the achievement of these wider goals.
1.4 Our Approach
This project is a key outcome of phase one of the Finance Reform
Programme and will define the next steps to support changes to financial
management practices across the system.
This project is sponsored by the CFO Tom Byrne and Mark Fagan provided
project management support and acted as key liaison with the HSE finance
community.
The project has involved a combined team from the HSE and PA
Consulting, bringing together expertise from both organisations.
The Senior Finance Team acted as a steering group, and a Working Group
was established to support key aspects of project delivery.
Our approach involved the following logical steps:
? Understanding the current position; informed by engagement, data
collection and the findings of recent reviews by PA Consulting and
Ogden into financial management practice;
? Identifying future requirements; drawing from the requirements of Future
Health and our insights into financial management leading practices;
? The development of options; and the assessment of these options
against overall requirements and the insights of the working group as to
the specific requirements of the system; and
? Recommendations for the design of the Finance Operating Model.
A critical element of our approach was to begin the journey of change during
the analysis by involving key individuals at all stages.
Collaboration and engagement with those that are experienced in HSE
finance was supported though a workshop based approach, involving
representatives from both statutory and voluntary service providers, and
process specialists from across all finance specialisms.
Targeted data collection activity was undertaken to provide a baseline
position to support any case for change, to understand the current shape of
finance, and to identify the training needs of the wider finance community.
This process was designed to enhance rather than duplicate any previous
data collection activity, to enable the development of an understanding of
the entirety of finance operations across both statutory and voluntary (s38)
providers.
1.5 Structure of the report
This report presents the conclusions of our work in developing a new
operating model for Finance and draws upon insights into current working
practices gained through engagement across the system, in discussions
during formal workshop sessions and from insight and analysis arising from
Culture and
behaviours
Services
FINANCE
OPERATING
MODEL
Structure
Skills and
capability
Information
and
technology
Process
Governance
and
controls
The operating model is a
representation of how HSE
Finance operates now, and could
operate in the future in terms of:
? Services to be delivered
? Systems requirements
? Process
? Governance and controls
? Information and technology
requirements
? Skills and capabilities
? Culture and Behaviours
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data collection undertaken. Views on future requirements, delivery options
and implementation challenges were sought from the Senior Finance Team,
process specialists and members of the working group, and this feedback
has shaped our thinking and is reflected in the proposed way forward, which
addresses the points raised in earlier reviews of financial management
practices and from Future Health.
? Chapter 2 describes the current operating model for financial
management across the HSE, highlighting areas of good practice, and
identifying aspects of the operating model that are not aligned with new
requirements of finance or good practice;
? Chapter 3 describes how financial management must evolve over time to
ensure that the changing financial management requirements of the
health system are supported effectively;
? Chapter 4 outlines the options considered in relation to key aspects of
financial management;
? Chapter 5 describes how financial management will operate in the future
to enable the CFO to discharge his accountabilities for financial
management across the system; and,
? Chapter 6 presents the implementation strategy and describes the step
changes to the operating model proposed over time to ensure continuity
and stability in financial management in a complex, changing
environment, and outlines a programme for change over a three year
period and a clear view of immediate actions required.
? Chapter 7 presents conclusions and recommends that Phase 2 of the
Finance Reform Programme to implement the new Finance Operating
Model commences with immediate effect.
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The current operating model for finance has evolved over
many years as the structure of the organisation it supports
has changed. The shape today is a combination of the
existing structure of the HSE (formed in 2005) and that of
its predecessor (the Eastern regional health authority
(ERHA) and boards). It incorporates many examples of
good practice, achieved in spite of variations in processes,
multiple financial systems and limited engagement with the
voluntary sector. This achievement is due to the
professionalism and hard work of the finance team.
However, the new requirements for finance and the
weaknesses identified in earlier reviews means that the
current operating model is not fit for future purpose.
2.1 The Current Finance Operating Model
In this section, we analyse the strengths and weaknesses of current
financial management practice across the HSE by describing the Current
Operating Model. Informed by interviews, the results of data analysis and
workshop discussions, we consider financial management in the context of
the following operating model elements:
? Customers;
? Service delivery model;
? Process, governance and controls;
? Information and Technology; and
? Skills, capabilities, culture and behaviours.
In doing this we have developed real insight and understanding of current
ways of working, which will be used to define the extent of change required
and enable examples of good practice to replicated across the system.
2.1.1 Data collection approach
Our understanding of the current operating model was significantly
enhanced by the results from two comprehensive data collection exercises:
? The shape of finance; and
? A training needs analysis.
The HR census in December 2012 states the headcount within National
Finance as 513.5 whole time equivalents (WTE). Due to limitations in the
way in which staff resources are categorised in other parts of the health
system, there is no way of knowing the extent of financial management
support being delivered by staff out-with National Finance other than by
undertaking a data collection exercise. The shape of finance survey was
designed to capture the amount of WTE involved in core finance processes.
The results provide an analysis of the proportionality of services – decision
support, compliance and transaction processing across finance in terms of
2 THE CURRENT SHAPE OF FINANCE
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time and cost. Overall, responses received identified 1,628 staff
representing 1,273.5 WTE. This includes staff employed directly within
National Finance, and those in local finance functions in National Services,
and in Health and Social Care Providers (HSCPs) from both the statutory
and voluntary sector. Our detailed analysis is presented in Appendix A.
In total 136 template returns were included in the analysis comprising:
? 23 of the 32 Local Health Offices(LHOs);
? 9 of the 38 S38 community providers;
? 20 of the 29 statutory acute hospitals;
? 9 of the 16 S38 voluntary acute hospitals; and
? 75 for other National Services such as National Finance (both corporate
and regional), National Shared Services and National Cancer Screening
Service.
The returns are therefore representative but not complete. Whilst they
provide sufficient insight into the current state of finance for the purposes of
this exercise there would be real value in completing the analysis to inform
the detailed design phase and accurately quantify the business case for
change.
The training needs analysis survey was developed to assess the
requirements for the training and development of future skills and
capabilities identified.
702 employees completed the survey from the 1,628 employees identified in
the Shape of Finance exercise. Again this is not a complete picture but
supports the identification of the broad skills gap and training required for
the system. Figure 2 below summarises the current operating model and it is
explained in the following paragraphs. Our detailed analysis is presented in
Appendix B.
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Figure 2: The Current Operating Model
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2.1.2 Customers
Financial management is provided across the entirety of the HSE and to the
Department of Health and Department of Children and Youth Affairs (DCYS)
by a combination of National, Regional and locally based finance teams.
The level of service provision and standards are inconsistent across the
customer base, with the greatest level of resource is focused at a regional
and local level:
? Regionally based finance teams provide accounting and decision support
services to the Regional Director of Operations to support his/her budget
management role. They also support local finance teams within statutory
acute hospitals;
? National Shared Services provide transaction processing services to
statutory acute hospitals; and
? Primary, Community and Continuing Care (PCCC) and voluntary
hospitals have local teams providing decision support and transaction
processing services.
Services provided to other parts of the health system are less
comprehensive, particularly in the context of financial management advice
and decision support:
? There is a recently established finance team within Primary Care
Reimbursement Service (PCRS) ;
? DCYS receive financial accounting and transaction processing services
through a service level agreement;
? National Services such as the National Cancer Screening Service have
local finance teams in place;
? National Finance supports corporate budgeting and the provision of
financial advice to the Department of Health, Fair Deal and Pensions;
and
? There is limited support provided at an operational finance level within
HSE Corporate and the National Ambulance Service.
2.1.3 Service Delivery Model
The service delivery model has evolved over multiple organisations and is
characterised by high variability and inconsistency.
There are three service categories currently being delivered across the
health system: transaction processing, compliance and decision support.
Transaction processing
The main transaction processing services provided are outlined below.
? Order to receipt
? Invoice approval to payment
? Payroll changes
? Payroll processing
? Private health claims
? In-patient statutory charge
? Road Traffic Accident (RTA) claims
? A&E cost recovery
? Other income
? Cash management and debt recovery.
These services are currently provided by operational finance teams or
Shared Services.
For some statutory organisations, invoice approval to payment, private
health claims income collection and cash matching and debt recovery
services are provided by Shared Services from eight locations. Staff
involved are located in the regional offices and will be managed by Shared
Services (this change is partially implemented).
Voluntary hospitals and PCCC have their own teams for invoice approval to
payment, private health claims income collection services and cash
matching and debt recovery.
Payroll processing for the statutory providers takes place in nine payroll
departments.
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Both statutory and voluntary organisations have staff who perform the front
end of finance transaction processes – order to receipt, payroll changes,
private health claims preparation, RTA claims, A&E cost recovery and other
income.
Compliance
The main compliance services provided are outlined below:
? Governance and controls
? Period end closure
? Cash management
? Financial statements
? Treasury / Vote
? Capital accounting
? Financial risk management and insurance
? Taxation
? Systems support.
Aspects of compliance are delivered by National Finance, Shared Services
and Operational Finance teams.
Strategic compliance (policy, guidance and governance) is mainly delivered
by centralised National Finance teams and through regionally-based finance
teams.
Other staff are involved in operational compliance – for example, Shared
Services produce payroll tax returns and regional operational finance are
involved in period end processing.
Decision support
The core decision support services are outlined below
? Financial strategy and planning
? Corporate budgeting
? Corporate financial management and reporting
? Programme financial management and reporting
? Operational budgeting
? Operational financial management and reporting
? Cost containment planning
? Costing
? Provision of financial advice
? Value for money
Decision support is provided by National Finance, Regional Finance and by
local operational finance teams within health and social care providers,
either in hospitals or LHOs.
2.1.4 Process, Governance and Controls
The Shape of Finance analysis (Appendix A) highlights that a
disproportionate share of finance resources are supporting Transaction
Processing (63%), with 19% of effort supporting Compliance and the
remainder (18%) in Decision Support.
This compares unfavourably to a traditional finance function which would
typically focus 45% of effort on Transaction Processing, 35% on compliance
and the remaining 20% on Decision Support.
Figure 3: The current shape of Finance in the HSE
63%
45%
19%
35%
18%
20%
0% 20% 40% 60% 80% 100%
As Is
Traditional
TRANSACTIONAL
COMPLIANCE AND CONTROL
DECISION SUPPORT
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We looked further to understand the nature and characteristics of the
processes supporting the core finance functions and governance and
controls in place and found:
? Processes are characterised by inconsistency, duplication and are
resource intensive: and
? Governance and controls are resource intensive due to the manual
nature of the controls framework and complexity in line of sight arising
from the multiple finance systems in operation.
The proportion of time spent on transaction processing is directly related to
the degree of manual intervention required and the non-standard nature of
core processes. The lack of integration between systems supporting end to
end processes such as HR, procurement and Payroll is also a factor. There
is evidence of significant variation in the front end of core processes, such
as requisitioning and, timesheet entry, with limited self-service (where users
are responsible for inputs and outputs to the system) and system based
controls in place. 42% of transaction processing activity supports the front-
end of core processes.
The following observations support these conclusions, and relate to the
statutory organisations unless otherwise stated. Voluntary providers have
local teams providing most of their services and in many instances have
invested in improved systems and processes to support core financial
management practice:
? Payroll processing is inconsistent and fragmented
Payroll processing reflects the former health board structures with
different systems, processes and delivery models in place in each board
area, including both internal and external processing and support
models. Payroll processing is undertaken in 60 locations. The front end
payroll changes are typically manual, with very little use of self-service;
? Creditor account processing is highly variable and often manual
Creditor accounts are paid through 8 regional offices. The invoices are
processed locally (in 99 locations) by procurement or finance staff and
sent to the regional office for payment. Finance staff based in the
regional offices are responsible for ensuring that the accounts are paid
correctly and on time and that the ledgers are updated to reflect the
transactions. The front end order to receipt processing ranges from
highly manual to highly automated;
Income processing is non-standard and fragmented
Income is billed, pursued, receipted and accounted for by finance
1
staff
at approximately 31 acute hospitals, 184 PCCC locations and 8 regional
offices throughout the country.
Each location is responsible for maintaining accurate debtor accounts in
respect of hospital and other charges. Staff in the location investigate
and resolve billing disputes and are responsible for pursuing outstanding
amounts via standardised follow up procedures (including referral to debt
collection agencies). They generate credit notes, issue amended
invoices and write off bad debts;
? Decision support is variable and focused on “backward- looking”
monitoring and performance reporting
The approach to decision support varies across the regions e.g. different
reporting templates and assumptions. There is also variation in the
support provided at an operational level in hospitals and ISAs (Integrated
Service Areas).
Decision support effort is mainly expended on ‘backward-looking’
monitoring and evaluation activity. Operational budgeting, operational
financial management and reporting, programme financial management
and reporting, corporate financial management and reporting, corporate
budgeting and cost containment planning account for 70% of the time
spent on decision support;
? Compliance is resource intensive and complicated by process
variation and multiple systems
The published Annual Financial Statements are compiled by
consolidating 13 individual financial statements from each of the former
1
Data as per the NFPS business case
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CONFIDENTIAL – between PA and The Health Service Executive
Health Boards and streamlined agencies, each of which are prepared
from the legacy financial systems in place in their area;
Whilst significant compliance layers are in place – financial regulations,
assurance / compliance statement – the line of sight is complicated by
process variation and multiple systems; and
The Shape of Finance analysis identifies examples of process
fragmentation; where an individual supports a number of finance
activities. In these circumstances there is a risk that skills, capability and
service quality are undermined, spans of control weakened and there is
increased risk of irregularity. To illustrate, the analysis shows that at
Grade VIII staff supported on average 11 different finance activities.
In summary, processes supporting core finance services are not
standardised, often manual in nature and are supported by multiple
systems, which drives duplication, inconsistency in quality and standards
and a resource intensive and often ineffective controls environment.
2.2 Information and technology
The information and technology landscape is complex and reflects many
years of under-investment. Multiple finance systems and version variability
in support tools, such as Excel are a common feature.
As a consequence the production of timely, reliable management
information on which to base informed financial decision making is
compromised and highly resource intensive.
Voluntary providers are required to provide financial information in a
prescribed format to enable consolidated reporting monthly via Internal
Monthly Returns (IMR) and annually through Annual Financial Statements
(AFS). Each entity has their own IT infrastructure in place, the maturity of
which varies.
Engagement through stakeholder interview and in workshop sessions has
identified challenges in Data Governance and the Financial Systems
themselves, which are explored below:
Data Governance
? Data ownership is poorly defined and data is managed at a system level
rather than as a corporate asset;
? There is no common chart of accounts in place;
? Data definitions are inconsistent ;
? Coding structures developed for core feeder systems are not aligned or
integrated; and
? Standard reports for management accounting purposes are not
prescribed.
Financial Systems
? The need to consolidate data from 30+ external feeder systems at period
end results in significant manual intervention, reconciliation and time
delays in closure;
? Month end reports are not circulated to budget holders until day 10 and
corporate finance do not receive a consolidated view of spend until day
15;
? There are eight separate instances of finance and procurement systems
in place, each disparate, with different systems supporting General
Ledger, Accounts Payable and Procurement functionality, including SAP,
Masterpiece and Smartstream;
? Four payroll systems support the statutory sector. There is no integration
between HR and Payroll systems in place.
? Each HSE area has its own company code, employer Revenue
registration number and completes its own end of year tax return;
? For the statutory and voluntary sectors there are currently 55 separate
systems consolidated into the Corporate Reporting Solution (CRS);
? The budget is managed and reconciled in a 3-way system; the budget
system (SYNERGY), local general ledgers and in CRS.
? The manual nature (such as batch processing) of many processes
results in limited line of sight and inability to embed system based rules
and controls to improve financial management practice; and
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CONFIDENTIAL – between PA and The Health Service Executive
? Other than local pilots of patient level costing there is no single system in
place to support service line reporting and operational budgetary control,
and to support costing at an operational level.
Financial Reporting
? Consolidated financial reporting is provided by the Corporate Reporting
Solution (CRS) which provides information at
2
AFS / General Ledger
level only and does not allow drill-down as there is no integration with
feeder systems such as procurement and payroll. Further analysis
requires email requests to all systems owners across the country;
? CRS has limited flexibility as it reports against consolidated datasets
rather than the source data itself. Changes to reporting requirements are
time-consuming to address due to the need to maintain complex data
mapping arrangements;
? Multiple versions of the truth are in place: reports produced for different
audiences are not always consistent in structure and form; resulting in a
lack of confidence in the information provided; and
? There is limited use of self-service in place, mainly for report distribution.
2.2.1 Skills and Capabilities
A training needs analysis was undertaken through an online survey to
understand the age profile, qualifications, skills and capabilities and
experience of staff supporting financial management across the system.
Respondents were asked to self-assess their skills across a broad spectrum
of requirements.
Overall, 702 staff out of the 1,628 staff identified in the shape of finance
survey completed the online questionnaire. This includes staff employed
directly within National Finance, and those in local finance functions in
National Services, and in
3
HSCPs from both the statutory and voluntary
2
Annual Financial Statement
3
Health and Social Care Provider
sector. The total size of this population is unknown which was one of the
primary reasons for the data collection exercises but unfortunately there are
those who did not complete the template. The data provides a usable
sample for this analysis but more comprehensive data is required to support
implementation of changes.
Finance staff are insightful, innovative and committed but are challenged by
an inconsistent investment in training and development, in IT and the impact
of a number of years of headcount reduction which has added increasing
workloads.
There are examples of knowledge sharing across communities of interest
(such as the regional management and financial accounting teams) but
limited use of more innovative approaches such as e-learning to support
staff development.
Detailed analysis is presented in Appendix B. Key observations include:
? 111 qualified accountants out of the 702 respondents (16%), 73% of
which are Grade 8 and higher. Whilst numbers of trainee accountants
are not included (or identified through the survey), this statistic raises
concerns for succession planning;
? Only 8% of qualified accountants are in the age group 20-39. This is very
low and although it does not include those in training, it suggests a
significant skills gap that needs to be addressed;
? Responses indicated 280 team managers and team leaders managing
420 team members, which represents a ratio of 1:1.5 and highlights a
potential to examine layers of management and spans of control as part
of any detailed organisation design. However, there will be a range of
spans of control from large to small teams and managers working without
teams; and
? 69% of the staff supporting finance activities are aged 40 and above,
which although indicating considerable knowledge and experience
highlights a requirement for succession planning, particularly for finance
activities where deep technical or system knowledge is required.
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CONFIDENTIAL – between PA and The Health Service Executive
The table below provides a summary of the perceived strengths and
weaknesses amongst the following staff groups:
? Managers undertaking Decision Support
? Team Leaders in Compliance
? Team members in Transaction Processing
Table 2: Current skills and capabilities
Decision Support:
Managers
Compliance:
Team Leader
Transaction Processing:
Team Member
S
t
r
e
n
g
t
h
s
? Outcome focused
? Customer focused
? Delivery focused
? Verbal and written
communication skills
? Innovative
? Embrace change
? Effective
communicators is the
one Interpersonal skill
that is aligned with
the desired profile
? Confident using MS
Office applications
? Self-motivation is very
good
? Outcome focused
? Customer focused
? Delivery focused
? Organisation
awareness is high
W
e
a
k
n
e
s
s
e
s
? People management
? Contract negotiation
? Operations
management
? Business analysis
? Budget Setting
? Cost containment
delivery
? Building financial
models
? Fraud detection
? Taxation
? Treasury
management
? Improvement
techniques
? Financial
Management
? Financial Modelling
? Systems
administration and
data validation
? Operations
Management
? Business Analysis
? Process Improvement
In summary, there is good alignment between the desired and actual
behavioural skills of staff across the HSE. However the gap widens with the
other three categories; interpersonal skills, technical skills and decision
support skills. A successful transition to a new finance operating model will
require significant training tailored to the requirements of the new model.
This survey highlighted the shortage of qualified accountants in the 20 to 39
year old age bracket and it is important that staff are encouraged and
supported to continuously develop their technical and professional skills and
are subsequently rewarded with more challenging roles. Continued
Professional Development (CPD) programmes should be established and
monitored to support and to provide real time skills analysis data.
The area of training needs should be revisited as part of a detailed design
process so that the skills required for each grade within each service
delivery can be more specifically identified.
2.2.2 Culture and Behaviours
Perhaps the greatest challenge being faced is in changing culture and
behaviours across the health system and this is consistent with many
change programmes.
Changes to systems and process alone will not drive the change in
behaviours sought in order to improve financial management practices
across the health system in order to achieve a more cost conscious culture.
Currently culture and behaviours can be characterised as follows:
? Financial management is about reporting not control;
? Budget holders are rarely accountable for success or failure in achieving
budgets;
? Staff place a greater importance on meeting external requirements (for
example reporting to Revenue Commissioners and the Comptroller and
Auditor General over compliance with internal rules and regulations;
? A lack of trust pervades across the system: be it in the financial
information available, the budget holder’s ability to deliver services within
budget; in the wider system adhering to guidance, standard process and
deadlines. This is evidenced in the manual controls in place to check,
often multiple times, inputs to core processes;
? A low sense of ‘belonging’ to the HSE – there remains a strong
allegiance to the “regional jersey” and alignment to predecessor
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CONFIDENTIAL – between PA and The Health Service Executive
organisational structure rather than the HSE. There is no evidence to
suggest that this behaviour is limited to finance only. The implication is
limited cross fertilisation and proliferation of local ways of working; and
? Variation is the norm: there is limited adherence to corporate standards
and deadlines. There is a real belief that variation is essential to meet
local requirements. This sanctioned variation to the norm promotes
inefficiency.
2.3 Inconsistency in support levels and
standards
As mentioned above, there are significant differences in terms of systems,
process, culture and behaviours, skills and capabilities and structures
across the current finance operating model. This level of inconsistency
exists both at a national and regional level.
Currently, the customers of finance within the regional operations such as
the statutory and voluntary acute hospitals and PCCC organisations receive
various levels of service provision from Finance; the statutory organisations
receive greater support than the voluntary organisations. This should imply
that the statutory organisations spend less of their time on transaction
processing however our research suggests differently. The following chart
illustrates the resources allocated to transaction process, compliance and
decision support across the statutory hospitals and communities and the
voluntary hospitals and community. It highlights that the statutory
organisations, both hospital and community spend more time on transaction
processing than the voluntaries. This supports the anecdotal evidence that
the voluntary hospitals have invested greater resources in their financial
management systems relative to the statutory hospitals in recent years.
Figure 4: The variation in support across the statutory and voluntary sector
2.4 The provider landscape
Health services are provided by hospitals, Integrated Service Areas (ISAs),
grant funded organisations (S38 and S39) and national services.
The HSCPs are in transition to new organisational groups. Six new Hospital
Groups have been announced, and their composition is shown in Appendix
C.
Hospital Groups generally comprise a combination of statutory and voluntary
providers. Whilst voluntary providers may continue to have external
reporting requirements, within the HSE the distinction between statutory and
voluntary is removed as the Hospital Groups will work with HSE as a single
organisation (with several locations).
An analysis of the financial management arrangements in place across each
of the emerging hospital groups is presented in Appendix C. Further work is
required to complete this picture. The analysis presents the 2013 budget
allocation, the number of finance WTEs, the financial systems, the financial
performance and the maturity of financial management practice by hospital
for each group.
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CONFIDENTIAL – between PA and The Health Service Executive
This provides a useful snapshot of the current position and insight to inform
the direction of travel each group should take as it transitions to Trust status
over time, to ensure that financial management arrangements are
appropriate given the challenging financial context in which they are
operating.
It is clear that there is little correlation between size of budget, finance staff
in place and relative financial performance.
In general and not specific to any hospital in particular, this is down to a
number of reasons such as:
? Hospital spend is outside the control of finance – finance is seen purely
as a reporting function.
? Inappropriate resource selection – HR policy of filling a finance post at
most grades with a general administration person irrespective of
experience, knowledge or ambition perpetuates this problem.
? Resource allocation – the balance of WTE across transaction
processing, compliance and decision support is significantly skewed
towards transaction processing and as such the budget holder in the
individual health and social care provider is unlikely to get the support
needed in terms of decision support. In the case of one hospital,
transaction processing takes up 79% of finance WTE resource.
A similar exercise should be undertaken for community services once the
ISA review has concluded.
2.5 The cost of finance
Using the data collected as part of the Shape of Finance exercise, the cost
of supporting core finance processes is estimated at €74m. As previously
stated, the data analysis is representative, but not complete, and it would be
fair to assume that the financial case presented here is conservative as a
result. Non-core finance process costs of €11.1m are included in the €74m
and detailed below.
4
This cost has been derived on a ‘full cost basis’ comprising salary, salary
on-costs for PRSI and pensions, and overheads consumed (such as
accommodation, technology and training). To put this in context, the net
budget allocated to National Finance in 2013 was €48.3m, highlighting the
extent of resources supporting financial management which are not
managed directly by the CFO.
Our analysis has enabled an outline process “cost to serve” to be produced
and this is summarised in table 3 below and explored in detail in table 4.
Table 3: Cost by Finance Service (excluding non-core finance processes)
Finance Service WTE Cost €
Transaction Processing 690 33,988,059
Compliance and Control 207 13,559,411
Decision Support 195 15,270,307
Total 1092 62,817,777
The survey sought to collect volume information (e.g. number of purchase
invoices and number of payslips) but insufficient data has been returned to
enable transaction costs and a meaningful benchmarking to be undertaken
at this stage. Finance should continue to capture volume data, particularly
from the voluntary sector in order to identify opportunities to reduce
transaction volumes and simplify processes. Appendix A includes a
proposed list of data to be collected.
This is important to inform the future design and to provide guidance on the
overall shape of finance required going forward. Reviewing the cost to serve
data highlights areas where cost savings and efficiencies are possible, and
these are explored in further in Chapter 3.
4
Blended rate of 8% for PRSI, 9% for Pensions and 20% for overheads
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CONFIDENTIAL – between PA and The Health Service Executive
Table 4: Cost by Finance Activity
Transaction processing Locations WTE Cost
Order to receipt 78 98 €4,734,700
Invoice approval to payment 99 178 €8,608,780
Payroll changes 68 116 €5,636,377
Payroll processing 60 143 €7,147,621
Private health claims 28 70 €3,482,828
RTA claims 25 6 €335,620
A&E cost recovery 129 9 €460,515
Other income - car parks, restaurants 58 26 €1,343,688
Cash matching and debt recovery 56 44 €2,237,930
Compliance Locations WTE Cost
Governance and controls 86 27 €1,966,733
Period end closure 79 69 €4,242,995
Cash management 64 19 €1,202,174
Financial statements – HSE and schemes 58 18 €1,446,877
Treasury / Vote 32 7 €506,756
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Capital accounting 34 13 €813,435
Financial risk management and insurance 29 7 €461,299
Taxation (PAYE, PRSI, USC, VAT) 37 24 €1,403,532
Systems support 47 23 €1,515,610
Decision support Locations WTE Cost
Financial strategy and planning 63 14 €1,292,923
Corporate budgeting 37 7 €601,607
Corporate financial management and reporting 61 22 €1,822,695
Programme financial management and reporting 47 13 €992,793
Operational budgeting 79 22 €1,679,153
Operational financial management and reporting 86 52 €3,649,235
Cost containment planning 76 16 €1,468,328
Costing (job, project, patient level) 48 17 €1,142,115
Provision of financial advice 82 22 €1,853,988
Value for money 60 10 €767,470
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CONFIDENTIAL – between PA and The Health Service Executive
None-Core Finance Processes Locations WTE Cost
Corporate Governance 46 4 €379,632
Line Management 97 44 €2,961,162
General Administration 107 95 €5,048,343
Finance Related Project work 77 37 €2,690,248
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CONFIDENTIAL – between PA and The Health Service Executive
2.6 Strengths to build on and areas for
development
The current finance operating model incorporates many examples of good
practice, achieved in spite of variations in processes, multiple financial
systems and limited engagement with the voluntary sector.
Strengths that we want to build on include:
? Aspects of the existing service delivery model which support:
– business partnering (e.g. ANDOF
5
s, NCSS
6
);
– finance specialists operating as centralised corporate teams (e.g.
treasury, taxation, financial statements and corporate budgeting and
reporting); and
– the development of shared services.
? Plans in place within National Shared Services to develop standardised
and simplified processes and to invest in technology to improve and
streamline processes. Progress has been made on standardising the
payments process;
? Aspects of the financial management framework to support compliance
which are already in place: – financial regulations, assurance /
compliance statements; and
? The flexibility, professionalism and commitment of the finance team in
the way that they work within current structural and systems constraints
to meet customer requirements.
However the analysis of the current operating model has identified
significant areas to be addressed in any new model proposed. These
include the following:
5
Assistant National Director of Finance
6
National Cancer Screening Service
? Inconsistency in the level and standards of service provided to different
customer groups across the system;
? The extent of financial management activity being supported by teams
with no direct accountability or responsibility to the CFO;
? The extent of process variation, inconsistent data definitions and multiple
finance systems in place inhibit the ability of staff involved in decision
support and compliance to make best use of their skills and expertise;
? Effectiveness of decision support being compromised by time spent
validating and manipulating data to meet information requirements of
customers;
? A lack of shared ownership of transaction processes – finance, HR and
procurement results in duplication and inconsistency in processes and a
lack of integration;
? Significant under-investment in technology which has compromised the
ability of finance to improve current working practices;
? Weak accountability for actions and recognition that financial
management is a corporate responsibility undermines the controlling role
of finance; and
? A lack of investment in training and development of both finance staff
and budget holders to ensure that they discharge their financial
management responsibilities effectively.
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CONFIDENTIAL – between PA and The Health Service Executive
There are three distinct drivers for change in the financial
management practices within the health system in Ireland:
? current financial management practices are overly
resource-intensive and inflexible, and do not adhere to
many core leading practice principles;
? better financial management is required to provide key
stakeholders with the confidence that expenditure in
health is under effective control; and
the requirements of the emerging health system (Future
Health) means that the current finance operating model
is no longer fit for purpose.
In considering how these drivers will influence the future
operating model, it is important to draw from leading
practice principles. In this chapter, we explore both the
drivers of change and leading practice principles and
conclude by setting out the requirements for change
across the finance operating model for health in Ireland.
3.1 Drivers of Change
The review of current financial management arrangements secured
consensus amongst the finance community that the current operating model
is no longer fit for purpose. There are a number of opportunities to address
legacy weaknesses and these are explored further below.
The appointment of the CFO signals a clear response to stakeholders that
steps will be taken to demonstrate that the health budget is being spent
wisely and is subject to effective financial management and control. We
consider the changes necessary to ensure that the CFO can make this
happen.
The importance of effective financial management in securing the desired
outcomes from Future Health should not be underestimated. We consider
the requirements arising from reform which require a change in the way
finance operates.
3.1.1 Opportunities Identified by the Current
Operating Model
The review of the Current Operating Model highlighted opportunities to
address legacy weaknesses in financial management and highlighted areas
where cost savings and efficiencies are possible.
3 HOW FINANCE NEEDS TO CHANGE
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CONFIDENTIAL – between PA and The Health Service Executive
It is important to note that realising these savings is contingent on being able
to re-train and redeploy staff into different roles across the system as
process and system improvements change staffing requirements.
Our analysis and supporting high level costings are drawn from our Shape
of Finance work, and are based on an in-complete data-set. The detailed
analysis can be found in Appendix A. There is no doubt that a complete
picture would strengthen further the case for change
Transaction processing - Purchase to pay (P2P)
There are 277 whole time equivalents (WTE) supporting the P2P process in
over 99 locations at an estimated cost of €13.3m. The purchase to pay
process ranges from highly manual to highly automated.
There are opportunities to standardise, simplify and further automate the
order to receipt process, to reduce transaction volumes and to consolidate
accounts payable activity.
The P2P strategy must be developed in conjunction with procurement. We
are aware that there is parallel work to restructure procurement, stores
management and the order to receipt process underway.
To optimise benefits, it is critical that purchase to pay is reviewed from an
end-to-end process perspective through co-ordinating finance and
procurement initiatives. Particular initiatives to investigate from a process
perspective will include:
? Strengthen strategic procurement (commodity management and
structured strategic sourcing programme) to reduce the number of
suppliers and transactions
? Implementation of best practice e-procurement technology to further
automate the order to receipt process, reducing paper-based manual
ordering and reducing time in the approval process, and improving
financial control.
? Improved compliance management in relation to supplier, process and
contract.
Our analysis estimates a potential annual saving of €4.3m from automating
and streamlining the P2P processes.
The move to HSCP groups provides an opportunity to make a step change
within the current systems environment as we see legacy hospital and
PCCC finance teams merging at group level.
Transaction processing - Payroll
There are 259 WTE supporting the payroll process in over 60 locations at a
full cost of €12.8m.
Payroll processing staff are currently located in 9 departments and there are
a range of processing arrangements in place. The process for payroll
changes is largely manual. There are opportunities to automate the front
end of payroll through self-service technologies and as part of operational
systems development, such as the use of rostering systems to provide input
data.
The end-to-end payroll process redesign has to align with work in HR and
operations. There is a significant, but challenging, opportunity to reduce the
number of payrolls. There are currently 101 different payroll cycles (6
weekly, 75 two weekly, 4 four weekly and 16 monthly) and this figure does
not include all of the voluntary organisations.
Payroll process efficiencies will arise from:
? Standard payroll data capture, processes and procedures
? Centralisation of payroll processing
? HR and payroll systems integration
? Self-serve technology
? Automation of payroll changes through self-service technologies and
operational systems
? On-going benchmarking of payroll processes and costs.
The median benchmark for payroll staff to total employees is 1:1200.
Applying this benchmark to the HSE would suggest a requirement for 97
WTE to support the payroll process, some 162 WTE less than current
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CONFIDENTIAL – between PA and The Health Service Executive
staffing levels. A reduction of staffing at these levels equates to an annual
saving of €5.7m.
Transaction processing - Income
There are 113 WTE involved in the income process in over 100 locations at
a full cost of €5.6m.
Income processes across the system are inconsistent and range from highly
manual to highly automated pointing to potential opportunities from process
redesign, simplification and standardisation.
Whilst processing road traffic accident (RTA) income, accident & emergency
(A&E) and other income such as parking fees must remain local, the
creation of hospital groups will provide the potential for some consolidation.
There is the potential to increase the role played by Shared Services in
supporting Private Health Claims processing, and this should be considered
further in the context of the move to MFTP
7
and UHI
8
.
Our analysis estimates a target annual saving of €0.5m from automating,
standardising and centralising income collection. There are also cash flow
benefits to be derived from automated, efficient income processes
supporting all HSCPs.
Compliance
Compliance involves 207 WTE at a full cost of €13.6m.
Compliance is resource intensive due to the need to support multiple
systems and non-standard, often manual processes. Specialist advice and
support is often fragmented with an increased risk of inconsistency and
variations in the quality and extent of support provided.
Mandated common processes supported by a single integrated financial
management system with systems based controls system based controls
7
Money Follows The Patient
8
Universal Health Insurance
will improve the control environment significantly, and will limit the extent of
non -compliance across the system.
It will remove the requirement to support period end processing validation
and verification at current levels
Our analysis estimates a target annual saving of €4.2m from mandating and
standardising compliance processes.
Decision support
Decision Support involves 194 WTE at a full cost of €15.2m. Decision
support is currently inconsistent and focused on performance management
and reporting activities.
The move to HSCP groups will facilitate the introduction of a consolidated
model for operational financial management and reporting i.e. support will
be provided at a group rather than individual hospital or LHO.
The Shape of Finance survey estimated that 43% of senior finance staff time
was spent on processes other than Decision Support. Anecdotal evidence
suggests that a lot of this time is spent on validation of data prior to making
decisions
It is important that the improvements made in transaction processing and
compliance enable a shift in focus, and transfer of resources towards
Decision Support.
There are opportunities to invest in decision support to improve:
? The quality and extent of strategic planning and performance
management provided
? Ensure consistent and appropriate levels of decision support for all areas
of the system
? The extent of forecasting, scenario planning, benchmarking and
comparative analysis undertaken to improve decision making and
challenge current ways of working
We have assumed a saving of €2m is possible through more effective use of
resources, and increasing the time spent by existing senior staff in
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CONFIDENTIAL – between PA and The Health Service Executive
supporting decision support. There will be a further un-quantified benefit
from better decision making across the system overall, which should result
in better outcomes for patients as a result of more effective use of
resources.
Conclusion
The high level case for change arising from opportunities to address existing
weaknesses in financial management is compelling, and builds on the
earlier arguments supporting business cases for systems implementation
developed in recent years by the HSE.
The table below summaries the potential savings and estimates that €15.8m
in annualised savings could be achieved representing 21% of the cost of
finance.
Potential Savings Total €m
Purchase to Pay 4.3
Payroll 5.7
Income 0.5
Compliance 3.0
Decision Support 2.0
Total Potential Savings 15.5
Savings as % of total Finance Cost 21%
In addition to these financial savings, there are significant non-financial
benefits to be achieved. There is a strong case for investing in financial
management as a means of realising significant benefit from cost reduction
and efficiency across the system through improved decision making.
Opportunity Benefits
Transaction processing
? Automation of the end-to-end
process
? Simplification and standardisation of
processes
? Reduction in transaction volumes
? Consolidation of teams
? Enhanced control of pay and non-pay
expenditure
? Improved customer experience (e.g.
between shared services and
HSCPs). Operations excellence has
a focus on customer relationship
management
Compliance
? Simplification and standardisation of
processes
? Rationalisation of systems
? Controls embedded in systems
? Mandatory financial management
framework
? Strengthened control
? Simplified compliance monitoring
? Opportunity to implement automated
exception reporting software
? Staff able to focus more on proactive
advice rather than reactive support
? Efficiency savings or redeploying
resources to added value activity or
activity that currently can’t be
undertaken
Decision support
? Standardised reporting
? Standardised data definitions
? Alignment of management and
financial accounting – one version of
the truth
? Strengthened support to operational
decision-making at national, regional
and HSCP level
? Focus on analysis, not data
validation and manipulation
? Trust in the data
Skills and capabilities
? Training and development plans
? Succession planning and career
development
? Workforce better equipped to deliver
financial management standards that
finance staff aspire to – professional
qualifications, appropriate
development of technical skills.
3.1.2 Achieving greater financial control
The HSE has responded to recognised weaknesses in current financial
management practice by establishing a new role of Chief Financial Officer
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(CFO) The CFO’s appointment sends a clear statement of intent to
stakeholders that steps will be taken to improve confidence in financial
management practices and to achieve greater financial control.
The CFO has accountability for financial management across the entire
health system. To discharge that accountability the CFO must ensure that
the financial management framework enables him to deliver against all four
facets of his role described in figure 5 below.
? Stewardship and accountability: ensuring the compliance framework is in
place to provide and true and fair view, and trust in the financial
information provided; and
? Financial Management: ensuring practices across the system inform
decision making, promote probity and value for money and a culture of
cost consciousness and continuous improvement.
? Corporate Leadership: as a Board member providing strategic direction,
effective corporate governance and building strong relationships; and
? Professional Leadership: driving professional standards, leading the
profession and building capability across the system.
This role cuts across the entire system and relates to financial management
practices supported by the CFO and his staff in controlling finances and
providing advice and support to Budget Holders in delivering services within
agreed resources.
The current operating model does not provide the CFO with the adequate
tools to discharge this responsibility.
The CFO is responsible for putting a financial control framework in place
and ensuring advice and support is provided to budget holders. He must
have the ability to escalate where exceptions are identified through
performance management or other channels to ensure that budgets are
managed effectively.
Key to this will be:
? building a culture of corporate responsibility for financial management;
? ensuring that budget holders have information and advice to support
expenditure decisions;
? mandating a system wide financial management framework;
? establishing training and development support and career development
plans;
? developing skills and capabilities for key finance roles and implementing
compulsory Continuous Professional Development (CPD) for all finance
professionals; and
? learning and development for both finance professionals and non-
financial managers to be recommended and supported by the CFO. In
particular, we recommend that all new budget holders receive training in
their financial responsibilities.
Understanding the different, but complementary roles, of operational and
financial managers in the context of budget management is critical to
ensuring an effective system of financial control across the system. Figure 6
overleaf outlines the roles as presently understood.
Figure 5: The Role of the CFO
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Figure 6: The differing roles of operational and financial managers in the context of budgetary control
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3.1.3 The emerging landscape and requirements for
financial management
The long term changes in Ireland’s health system, as described in Future
Health: A Strategic Framework for Reform of the Health Service 2012 –
2015) have significant implications for finance. In particular, finance has to
respond to the HSE moving to a commissioning body, funding based in part
on money follows the patient and budgets organised by national care
groups. Whilst finance has traditionally found innovative solutions to new
requirements, the consensus of the Working Group is that the current
operating model cannot effectively respond to these changes. Figure 7
overleaf is our interpretation of the emerging landscape and the primary
changes are:
? The transition from the HSE to the HCA;
? The changing relationship with the Department for Health;
? The financial management requirements from Money Follows the
Patient;
? The changing Provider landscape; and
? The introduction of UHI.
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Figure 7: The Emerging Landscape
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The transition from the HSE to the HCA
One of the key features of Future Health is the separation between the
agency purchasing health services and the agencies providing those
services. This objective will be fulfilled with the establishment of the
Healthcare Commissioning Agency, planned for Q1/Q2 2014. Currently,
healthcare is both commissioned and provided through the HSE with the
exception of ancillary health services which are provided through grants to
the voluntary sector.
Five National Directors accountable to the Director General for acute,
primary care, social care, mental health and health and wellbeing services
have been appointed. They are responsible at national level for the reform
and delivery of services in their specified service domain, and the
development of national service strategies and strategic commissioning
frameworks for their areas of responsibility. Their role starts to model the
type of management approach that will be in place once a fully-fledged
commissioning model is in operation.
Performance management and responsibility will reside at the most
appropriate level with HSCP CEOs (or equivalent) having performance
management as a core part of their roles. RDPIs
9
will serve as ‘Contract
Managers’ at a regional level and will be expected to manage performance
issues directly with HSCP CEOs in the first instance. ‘Exceptional’
performance issues will be dealt with through a formal escalation process.
The HSE will introduce an interim performance contract which will integrate
the key performance and financial targets of the service plans and cost
containment plans, set out the performance management requirements and
conditions as well as intervention and support provisions.
From a financial management perspective, transition to the HCA requires
the provision of financial advice and support to the National Directors and
RDPIs and requires a view of financial information by care group (nationally
and by region).
9
Regional Director for Performance and Integration
Commissioning creates a need for decision support services which draw
upon financial and non-financial information (such as demographics and
health economics). Decision support services typically include:
? Strategic planning: scenario planning around levels of activity and
performance to inform external and internal resource allocation and
policy and best use of resources; and
? Procuring services: shaping health care provision and using tariff and
patient costing information to inform distribution of activity targets to
health care providers.
The appointment of the National Directors means that finance will need to
prepare cash and expenditure budgets and report cash and expenditure by
care group, with drill down to underlying transactional detail. This has
implications for coding structures to enable income and expenditure to be
recorded by care group and region. The ability to do this will depend upon
coding structures in feeder systems and the general ledger.
The separation of commissioning services and service provision exists in
other health jurisdictions. The following describes the arrangements for the
NHS in England, and figure 8 illustrates the framework in place to support
commissioning arrangements.
From April 2013, Clinical commissioning groups (CCGs) are the cornerstone of
the new health system. Each of the 8,000 GP practices in England is now part of
a CCG. There are 211 CCGs altogether, commissioning care for an average of
226,000 people each. CCGs will commission the majority of health services,
including emergency care, elective hospital care, maternity services, and
community and mental health services. In 2013/14 they will be responsible for a
budget of £65 billion, around 60 per cent of the total NHS budget.
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The RDPIs will require support for performance management and planning,
in particular, to monitor and evaluate HSCPs, the analysis of financial
performance (including cost containment plans) with a risk rating to indicate
if further information or intervention is required and benchmarking of unit
costs.
The changing relationship with the Department for Health
The relationship with the Department of Health will change because of:
? Return of the Vote to the Department in 2014, which will result in a
significant change in the relationship and financial governance
arrangements that exist between the HSE and the Department of Health
at present.
? The changing role of the department as the HCA (with a direct reporting
line to the Minister) is established in the move to the separation of
commissioning and provider.
At the very least these changes will require the ability to be flexible in
reporting spend, both on a cash and income and expenditure basis, and
there will inevitably be changing financial reporting requirements as
commissioning becomes a reality.
The changing relationship between commissioners and providers, and the
inevitable change in the level of detail reported to the Department for Health,
where there will be a greater focus on strategic rather than operational
information, will have consequences in terms of culture and behaviour for
both the Department and the HCA as the system emerges.
Figure 8: The Commissioning Wheel for the NHS
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The financial management requirements from Money Follows the
Patient
Under money follows the patient (MFTP) payment will be made on the basis
of each patient seen or treated, taking into account complexity of healthcare
needs and will therefore replace block grant allocation for activities in scope.
Implementation of the HCA will see the use of Performance Contracts to link
payments with the achievement of targets. The System Reform plan
anticipates that MFTP will be operating in shadow form in 2013 and is
planned to be fully operational from 2014. Work is underway to develop a
national tariff based on an assessed level of complexity and case mix. The
following flow charts are our interpretation of the planning and operational
processes that could follow from the MFTP policy papers.
From a finance perspective, capacity and capability will be required at two
levels:
? Nationally to determine the DRG (diagnosis related group) pricelist,
support budget and performance scenarios, convert national metrics into
performance contracts, monitor performance contracts, maintain systems
to , convert claims into tariffs, audit and pay claims. In particular, finance
will play a role in supporting over/under-trade activity analysis to
understand the system wide impact; and
? Locally (within HSCPs) to prepare claims and deliver patient costing and
service line reporting.
MFTP has to be supported by a patient costing system which both provides
costing information to inform tariff setting and enables HSCPs to understand
their performance relative to the tariffs set. The patient costing system
should be supported by a standard costing manual and collation/sharing of
patient level costing expertise. A system is also required to support claims
management.
It is our understanding that MFTP will operate on average tariffs. When
MFTP has been implemented there is typically a 2-3 year period of support
to allow providers with costs above average to revise ways of working.
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Figure 9: The planning and operational processes that could follow from the MFTP
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The changing Provider landscape
One of the fundamental changes envisaged under Future Health is the
establishment of independent hospital trusts. The reorganisation of acute
hospitals into groups, each with their own Board and Group Chief Executive,
is a cornerstone of Government policy. Six hospital groups have been
created on an administrative basis that will see operational responsibility for
all statutory and HSE funded hospitals transfer to Hospital Group Chief
Executives and interim Boards, who in turn will report into the National
Director for Acute Services. Hospital Groups will eventually become
independent hospital trusts, however they will in the interim each have a
Hospital Group Board with an independent Chair.
Plans for the structures of primary care, social care, mental health and
health and wellbeing services are at this stage less developed than for acute
hospital services. However what we currently know is that:
? Primary care, social care, mental health and health and wellbeing
services will be managed within an integrated management structure at
the level of what are currently described as Integrated Service Areas
(ISAs). This will include HSE funded agencies in these service areas.
? A review of ISAs will be undertaken in 2013. This review is expected to
lead to a reduction in the number of ISAs nationally.
From a financial perspective, the move to HSCP groups creates the
following financial management issues and requirements:
? Rationalisation of finance systems, processes and finance teams within
HSCPs;
? Operational financial management: support to HSCP operational
managers in areas such as service line management, operational budget
management and cost containment plans. Operational financial
management business partners and management accountants will
provide this support; and
? Potential implication for grant funded bodies and primary care providers
following introduction of commissioning frameworks. Evidence from
England is that consolidation of the market and market forces can drive
some social care providers out of business.
The introduction of UHI
The current plan is to move the health service from a tax funded system to a
combination of UHI and tax funding from 2016. Under this arrangement,
claims for payment for health services within the scope of UHI will be
submitted to insurance companies for payment.
This will result in a further change in funding arrangements from the system,
and may lead to insurers being funded directly from the Department, and the
HCA as commissioners relying on the UHI provider to provide core
information on service levels and spend to enable contract management to
be supported. This will require support mechanisms similar to MFTP –
patient costing system and a claims management system – and is likely to
be an enhancement of the system adopted to support tariffs, with an
underlying change in roles, responsibilities and accountabilities. Both MFTP
and UHI require a patient costing system and a claims management system.
Under UHI, responsibility for approving claims and paying HSCPs will
transfer to the insurance companies.
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3.2 How Finance functions in other
organisations are transforming
The "traditional" finance function is characterised by a significant investment
in terms of people, and cost, in core finance operations processes, such as
general accounting, reporting and transaction processing, with less of a
focus on policy development and decision support.
In recent times there has been an increased focus on "professionalising" the
Finance function with a focus on skills and capability development around
the following areas:
? Effective leadership
? Cost conscious culture
? Professionalism Expert central functions
This implies a step change in the way finance supports the organisation,
involving a shift in resources from finance operations towards decision
support, with finance shaping future strategic direction and adding real value
in embedding that cost conscious culture across the organisation.
This new approach has its origins in the HR model developed by Dave
Ulrich of Ross School of Business at the University of Michigan. Ulrich
introduced the concepts of three business components: business partners,
specialists and operations excellence.
Achieving this shift is challenging, however, as the “engine room” needs to
operate effectively if the Finance function is to have credibility in the
organisation, and is to earn the right to act as trusted adviser, participating
more in added value activities such as decision support and policy and
strategy development. This move, beyond governance and probity, to
supporting the commercialisation of services and ensuring decisions have a
sound financial footing, is essential to support the change agenda.
The figure below illustrates how leading organisations have transformed
their Finance operations, to refocus resources to higher value decision
support services, whilst ensuring the “engine room” or core financial
administration is operating as efficiently as possible.
Figure 10: How leading organisations have transformed their finance
operations
There are three underlying prerequisites of a best in class finance operating
model:
? A Financial Management Framework that sets the rules to achieve
desired behaviours;
? Ensuring Finance adds value; and
? Efficient and effective Transaction Processing
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3.2.1 A financial management framework that sets
the rules to achieve desired behaviours
Effective compliance within the financial management framework relies upon
providing timely, accurate, consistent, relevant and comparable financial
records that are kept and filed in accordance with accepted accounting
practices to satisfy the needs of all stakeholders, both internally and
externally.
The particular challenge for finance is securing influence over the front end
of payroll, payments and income processes since this is where risk
predominantly lies and these parts of the processes are usually outside the
direct control of finance. This challenge is further complicated where there
are multiple systems and variation in process. Influencing the front end of
processes is essential for two reasons:
? trust in the integrity of information; and
? control over pay and non-pay expenditure and income.
The CFO is accountable for financial management across the entire
organisation and requires assurance that effective systems of financial
control are in place. Assurance is provided by setting the rules, establishing
guidance and principles and monitoring compliance. Assurance means that
key stakeholders can rely upon the data for decision support.
Where compliance is robust, it tends to be underpinned by the following
culture and behaviours:
? Trust: On a personal level, individuals in the organisation must operate
with honesty and propriety. Senior staff should lead by example in
following procedures and by declaring any personal interests that might
conflict with their official duties.
? Integrity: An organisation’s integrity is derived from the standards of its
people and processes. It is imperative that people with the appropriate
skills and capabilities are in situ to ensure that predetermined standards
are met to provide assurance to the CFO.
? Accountability: An organisation must explain how it has used its
resources and what it has achieved as a result to all stakeholders and
has an operational, moral and legal duty to explain its decisions and
actions, and submit its financial reports to scrutiny.
? Consistency: An organisation's financial policies and systems must be
consistent over time. This promotes comparability, efficient operations
and transparency, especially in financial reporting. Inconsistent
approaches can be a sign that the financial situation is being
manipulated.
? Timeliness: An organisation must ensure the timely production of its
financial reports so that action, when required, can be taken close to the
event. Information losses its relevance the further away it is from the time
period it refers to.
? Accounting standards: The system for keeping financial records and
documentation must observe internationally accepted accounting
standards and principles. Any accountant from anywhere around the
world should be able to understand the organisation’s system for keeping
financial records.
? Sustainability: Expenditure must be kept in balance with incoming
funds, both at the operational and the strategic levels. Viability is a
measure of the providers’ financial stability. Management should prepare
a financing strategy to show how it will meet its financial obligations.
? Acceptance: compliance framework accepted across the organisation.
Regulation ranges from light touch to prescriptive. A prescriptive approach
should be taken where there is variable financial management maturity
across the organisation. This means that the CFO will specify rules and
regulations, systems and controls, and the risk management / intervention
process. This could include the following:
? Rules and regulations covering scheme of delegation, reporting formats,
operational protocols, standard chart of accounts, procurement codes;
? Risk management: working capital KPIs (key performance indicators),
integrity of balances;
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? Rules embedded in systems to prevent override and manipulation;
? Mandatory compliance training, including online training;
? Sanctions for non-compliance, including no response to formal
recommendations; and
? Advice: online access to regulations through a governance web site,
single point of contact for technical guidance.
International experience also identifies the need for inspection to provide
assurance that there is compliance throughout the organisation. Inspection
models typically include the following components:
? Risk assessment: operating units will have a varying risk profile, for
example reflecting scale and dependency. Arguably, operating units with
a higher risk profile would receive a more focused inspection regime’;
? Monitoring: routine performance management, supported by analysis is
the basis for assessing financial risk. Typically, a performance
management framework sets out the financial information that will be
captured monthly. Monitoring also includes exception reporting e.g. of
taxation issues. A dashboard of key information that highlights
exceptions / areas of concern is produced;
? Investigation: where monitoring highlights areas of concern, further
analysis is undertaken to confirm whether there is an issue, the scale
and impact of the issue and to propose regulatory action; and
? Action: where investigation identifies an issue to be addressed, action
ranges from support to the local team through to administration.
3.2.2 Ensuring Finance adds value
Decision support is concerned with providing financial advice to both internal
and external stakeholders to enable them to address policy and service
delivery challenges (both tactical and strategic). The advice is based upon
deep analytical capability, horizon scanning and scenario planning to
provide evidence-based and insightful analysis to support decision making.
Critical to decision support is the leading practice principle of business
partnering. The CIMA report Mastering Finance Business Partnering states
that ‘Finance Business Partnering’ is increasingly viewed as the most
effective way for in-house finance teams to add value’. Appendix D contains
selected case studies of organisations that have implemented finance
business partnering.
Operational Business partners are embedded in the business, often with a
matrix reporting structure such as a full line to the CFO and a dotted line to
the business manager or vice versa.
They have a professional responsibility to ensure that the organisation is
compliant with its reporting and control responsibilities and support
operational financial management and reporting, service line reporting.
Strategic business partners support strategic decision making and challenge
business managers to improve performance. Evidence from PA experience,
published case studies and academic research is that business partners act
as trusted advisers at the side of senior operational managers.
“Within Deutsche Post DHL, the finance community
sees itself as the ‘navigators’ of the business. In fact,
there is an extensive set of training and coaching
available within our in house ‘Advanced Navigator’
program. There is a very clear split between financial
accounting and controlling”
Pete Bandtock
DIRECTOR FINANCE BPO, DHL
Strategic business partners provide business leaders with information and
analysis about the organisations or function’s position and course,
contributing to strategic decision making and risk/performance management.
This means that these finance business partners are co-located with senior
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operational managers. These business partners need to be close enough to
operational managers to identify and understand the main areas of focus.
There is evidence that higher-performing organisations have finance teams
that influence all functional areas of the business.
“Balancing responsibilities to control and empower.
Finance business partnering is not so much a new role
as an extension or rebalancing of the finance
function’s traditional responsibilities so that finance is
not just an overhead but helps to create value’”
Toby Willson
FD, MICROSOFT UK
Finance business partners take a different approach from the conventional
finance team’s focus on historical numbers. Whilst the core finance function
continues to handle transaction processing, compliance and standard
reporting activities, the finance business partners look forward, providing
strategic insights.
Top quartile organisations have around 15% of finance WTE in business
partnering roles.
Trust is critical to the effectiveness of business partnering and is earned
through:
? Trust of information – the first step towards maturity is finance’s ability to
present impartial, accurate and timely information that the business
trusts;
? Trust of execution – finance needs to build on the first level of trust by
always following up on what it says it will do, and being proactive in its
advice; and
? Trust of judgement – this third stage takes time, as it depends on the
business partners’ track record of value-creating analysis and ideas.
Here, the business comes to recognise and value the finance business
partners’ grasp of how operational decisions deliver financial outcomes.
The business partner becomes the first person the business unit
manager calls to help guide decision making.
“The best business partners I have seen are able to
simplify complex situations so that line management
are able to grasp it, engage with it and understand the
consequences of different courses of action’”
Graham Colbert
VICE PRESIDENT OF FINANCE FOR ISMO, ASTRAZENECA’S INTERNATIONAL
SALES AND MARKETING ORGANISATION
The empirical evidence is that the effectiveness of finance business partners
strengthens as trust from operational managers develops and finance
matures (so that decision support is based upon reliable, relevant and timely
data). However, the evidence is also that organisations implement finance
business partners whilst addressing weaknesses in finance.
A finance business partner has a core skill set of finance and accounting
skills. Above this they have a combination of skills which on the one side are
about business understanding and strategic awareness and on the other,
how to influence people and even provide leadership. This requires a
passion for the business as well as the soft skill set. These skills are capped
with professional standards to provide integrity.
Implementation of finance business partners typically has the following
components:
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? Appointments follow developments in the operational organisation
structure;
? Tripartite agreement between senior operations manager, finance
business partner and CFO on areas of focus;
? Training and development programme to enhance the range of skills
required in a finance business partner, combining e-learning with
bespoke coaching and mentoring;
? Creating a community of interest to share experiences and highlighting
examples of success to build credibility, for example through an online
portal;
? Review of effectiveness through annual customer surveys completed by
both the finance business partners and their customers, scoring
performance against specific goals; and
? Rotation of finance business partners every 2-3 years to expand their
understanding of the business and to gain experience of working with
different management styles.
3.2.3 Efficient and effective Transaction Processing
The “engine room” needs to operate effectively if the Finance function is to
have credibility in the organisation. Leading practices in transaction
processing are concerned with the efficient processing of high volume,
repetitive and predictable activities. Efficient processing of transactions
depends upon the following principles:
? Single finance system;
? Single chart of accounts;
? Common procurement and HR codes;
? Standards and controls nationally defined and implemented;
? End-to-end management of processes, including integration with
Procurement and HR;
? Processes that are standardised, simplified and automated as far as
possible;
? Reduction of transaction volumes through rationalisation of suppliers,
consolidation of invoices and rationalisation of payrolls;
? Focus on continuous improvement, including benchmarking; and
? Resources with appropriate skills and capabilities: operational
excellence, change management, project management.
“The structure of the accounting and finance function is
changing. Increasingly both transaction processing and
analysis are being handled in a shared service model.
In this environment a finance person still re-working
numbers will be an additional overhead. Finance is
going to become a smaller exception-based advisory
group”
Roy Barden
THE HACKETT GROUP
Transaction processing can be delivered in house or outsourced. With
regards to outsourcing, a distinction can be made between processing and
supporting technology.
Shared services operate through service level agreements, which set out
both levels of performance for shared services (quality, timeliness and cost)
and expectations from customers (timeliness and accuracy).
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In the UK, NHS Shared Business Services (NHS SBS) is a joint venture
between the Department of Health and Steria, and leads the way in developing
and providing Finance & Accounting, Payroll, e-Procurement and Family Health
Services to all types of NHS organisations. Under this arrangement, Steria
provides IT business services whilst transaction processing is undertaken by
NHS staff. With over 1,200 people employed and in excess of 4.5 million
transactions processed per annum, NHS SBS works with over 30% of NHS
organisations to deliver operational efficiencies, cost savings and improved
service quality.
3.3 Requirements for change across the
finance operating model for health in
Ireland
In section 3.1 above we identified three drivers of change; consensus that
the current operating model is not fit for purpose; the need for improved
financial management accountability and control; and the changing
requirements due to the emerging healthcare landscape.
We also explored leading practice and the changing role of the finance
function with a particular focus on adding value through decision support.
The Working Group has endorsed this assessment.
The changes needed, and the drivers for those changes are summarised in
Table 5 below.
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Table 5: Changes required in financial management practices
Driver of change What needs to change
Transition from HSE to HCA
? Re-alignment of business partners from the current mainly regional structure to align with National
Directors and RDPIs
? Ability to report cash and expenditure by care group. Whilst budgets can be restructured by care
group, coding structures do not allow actual cash usage and expenditure to be reported by care
group. Further detail on the issues is contained in Appendix H
Relationship with Department of Health
? Ability to report cash and expenditure by care group. Whilst budgets can be restructured by care
group, coding structures do not allow actual cash usage and expenditure to be reported by care
group. Further detail on the issues is contained in Appendix H
Money Follow the Patient and UHI
? National Clinical Data Dictionary developed for Ireland to support consistency of data
? Default patient costing system defined
? Minimum standards of costing capability and use of costing information
? Community of interest for staff involved in PLC
? Budget allocation model based where relevant on tariffs
? Claims management system developed to initially meet requirements of the HCA and in the longer
term the requirements of insurers
? Auditing and inspection regime established, including access to individual patient records
? Develop analytical capability for MFTP budget modelling and policy scenario testing
Provider landscape
? As HSCP groups are formed, rationalisation of systems, processes and finance teams will naturally
happen. There is an opportunity to define and influence the strategic direction of these changes
through a mandated financial management framework
? Development of HSCP CFOs (or equivalent) and management accountants into operational financial
management business partners
Enablers (supporting building blocks that underpin
the above)
? Standardised and simplified processes
? Further automation of front end of processes, including deployment of self-service technology
? End-to-end management of processes, including integration with HR and Procurement
? Clearly defined and understood governance model, including reporting relationships with the CFO
? Rules embedded in systems where practicable
? Clear accountability arrangements for the new operational structure, including authority to intervene
where there is significant non-compliance
? Business intelligence, drawing upon multiple sources of data with deep analytical skills
? Financial system that is able to provide different views of financial information
? Standardisation of data, with System wide data standards
? Clear ownership of data - finance data should be owned by finance
? Performance management framework that includes sanctions
? Cultural change to strengthen recognition that financial management is a corporate responsibility and
sanctions for non-compliance
? Workforce development plan, including learning and development and career progression
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The future operating model must be able to achieve the following if it is to
fulfil the real opportunity that it is currently presented with:
? Commissioning and strategic planning support to National Directors;
? Performance management support to RDPIs;
? Operational financial management support to HSCP operational
managers;
? Capacity and capability to respond to new requirements such as MFTP;
? Flexible systems capable of supporting new requirements (and adaptable
to future requirements);
? Consistent data definitions and single point of data ownership;
? Standard processes that are simplified and automated as far as
practicable;
? Mandated financial management framework; and
? Auditing and inspection regime established.
To conclude however, the future operating model will only be able to deliver
these if the following components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and
facilitating effective self-service principles;
? Trusted financial management information which supports
effective decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance
management arrangements which reward good practices and
provide sanction where appropriate.
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Chapter 3 explored the reasons why financial
management practices within the Irish health system must
change and considered ways in which leading practice
principles could shape future ways of working. There are,
however, choices as to how key leading practice principles
should be adopted within the context of the Irish health
system. Workshop sessions facilitated the exploration and
appraisal of these options and the outcomes are explored
further in the paragraphs that follow.
4.1 Our approach to options appraisal
Workshops were held with the Working Group and process specialists to
consider and appraise the extent to which leading practice principles should
be applied in relation to:
? How best to achieve effective compliance and control, and the level of
prescription required to underpin the Financial Management Framework;
? the most appropriate way to deliver effective transaction processing; and
? the complexities in the Business partnering role and how to facilitate
accountability to the CFO without a direct line management relationship.
At each workshop:
? Options were described
? Evaluation criteria proposed
? Scoring mechanism proposed.
Workshop attendees then debated the options against the evaluation criteria
and scoring mechanism to reach a recommended solution. Appendix E
contains further detail in relation to the options appraisal undertaken, whilst
the key issues are discussed in the following sections.
4.2 Defining the Financial Management
Framework
Chapter 3 outlines the importance of an effective financial management
framework in providing assurance to the CFO in relation to financial
management practice across the system. The degree of prescription
required depends on the relative maturity of each organisation.
The leading practice principles underpinning robust financial management
were explored and the degree to which these were made a mandatory
requirement across the system was assessed. The elements considered
and options appraised are summarised in the adjacent table.
4 OPTIONS APPRAISAL
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Table 6: Delivery Options and Evaluation Criteria
Operating model
element
Delivery options Evaluation criteria
? Process (the way in
which the service is
undertaken)
? Governance and
controls (internal and
external regulations)
? Information (data
governance)
? Technology (supporting
systems)
? Skills of the finance
professionals in the
System
? Culture and behaviours
(compliance and
sanctions)
? Mandatory: all HSCPS
are required to comply
with standards defined
by CFO
? Recommended: all
HSCPS are encouraged
to comply with
standards defined by
CFO
? Guidance: all HSCPS
are to consider
standards defined by
CFO
? Alignment with design
principles
? Meets requirements of
Future Health
? Improves quality of
management
information
? Changes behaviours
? Releases resources for
value-added services
? Deliverability: capability,
capacity, affordability
and risk.
The detailed options appraisal is in Appendix E.
There was overwhelming consensus for the need for a high level of
prescription across the system, with the CFO mandating all aspects with the
exception of Culture and Behaviours, which due to its nature, could only be
recommended.
The recommendations are:
Aspect of Compliance Degree of prescription by
CFO
Process (the way in which the service is carried out) Mandatory
Governance and Controls (internal and external
regulations)
Mandatory
Information (data governance) Mandatory
Technology (supporting systems) Mandatory
Skills of finance professionals in the system Mandatory
Culture and Behaviours Recommended
4.3 Delivering effective transaction
processing
The importance of effective transaction processing to the overall
effectiveness of financial management was discussed and agreed. The HSE
is on a journey to transform transaction processing through a shared
services delivery model, and this has been given further impetus with the
creation of National Shared Services. As a result the CFO does not have
direct line management responsibility for the delivery of core finance
functions which are critical to, and underpin the effectiveness of overall
financial management practices.
The Working Group explored the delivery model options available to
consider the best way to ensure :
? finance can influence the end to end transaction process, and that these
are standardised and consistently adhered to;
? effective information management and data governance; and
? the delivery of a single financial system in the most efficient and cost
effective way.
The detailed options appraisal is contained in Appendix E.
The recommendations are:
Operating model component Preferred Provider /
Owner
Data Governance CFO
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Transaction Processing National Shared
Services
Technology to support transaction processing and
financial reporting
Managed
Service
provider
? It was considered that this approach would provide the optimum solution
in terms of cost, flexibility and future proofing in an unknown
environment;
? In addition it was concluded that strong governance between Finance
and National Shared Services is essential to support system
implementation and process transformation, through a combination of
reporting relationships and service level agreements; and
? The introduction of a client / contractor split would be essential to
manage operational delivery arrangements.
4.4 Addressing line management and
accountability in Business Partnering
Leading practice principles stress the importance of ensuring that Finance
adds value through its role in shaping strategic and operational decision
making through the provision of financial advice and support. The concept of
Business partnering was introduced as an effective model to support this
process.
The Working Group explored the relative strengths and weaknesses of
deploying a business partnering model which involved three distinct roles:
? Commissioning Business Partners, who support National Directors in
their responsibilities;
? Performance Business Partners, who work with the Chief Operating
Officer (COO) and RDPIs in supporting the planning and performance
management process; and
? Operational Business Partners who are responsible for financial
management support within HSCPs.
The nature of Business Partnering is such that it requires dual reporting
lines to enable:
? Accountability to the ‘customer’ to be a trusted adviser and to provide
the highest standards of professional advice and support to inform
decision making; and
? Accountability to the CFO to adhere to and enforce appropriate systems
of financial management and control, and to maintain professional
standards, codes of practice and ethics.
In these circumstances, matrix reporting lines are established. To be
effective, these require clarity in terms of respective responsibilities and
accountabilities, a means of agreeing performance standards and an
approach to address poor performance where a line management
relationship does not exist.
It has been concluded that a direct line reporting arrangement between the
CFO and the Finance Director (FD) of an HSCP is not appropriate due to:
? Complexities within the HSCP environment arising from the diverse
governance and reporting arrangements in place; and
? SFT’s view that that line management of finance staff within providers
may result in a lack of ownership for operational financial management
amongst clinicians and service managers.
It is envisaged that staff in HSCPs will have a professional accountability to
the CFO as head of profession and the CFO will play a role in ensuring the
quality of financial management provided across the system.
However, FDs in HSCPs must directly report to the CFO in respect of the
introduction of any new financial management framework, systems,
processes, structures, and any costing and service line management
arrangements.
This can be achieved by managing that change as part of an overall
programme, where the CFO is the SRO and the FD is responsible for local
project delivery.
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4.5 Conclusion and recommended way
forward
In shaping the new operating model the following principles should apply:
Mandatory financial
management framework to
apply across the health
system
? Use of a single financial management
system (covering Finance, HR and
procurement)
? Provision and management of the system to
be outsourced
? Information and data governance to be
owned by the CFO enabling a common chart
of accounts and data standards to be
consistently applied System wide
? Information to be collected once and used
many times with financial reporting and data
analytics being delivered in a standardised,
consistent way to all users through
operations excellence
? Governance and controls (internal and
external regulations) and the use of standard
processes and the way in which services are
delivered
? Ownership of end to end transaction
processes resting with operations excellence
? Skills and capabilities for key finance roles
? CPD compulsory for all finance professionals
? Learning and development for both finance
professionals and non-financial managers to
be recommended and supported by the
CFO.
Facilitating leading practices
in transaction processing
? Data governance should be owned by
Finance
? Transaction processing should be delivered
through operations excellence
? Technology to support transaction
processing should be delivered through a
managed service.
? Strong governance between Finance and
National Shared Services required to
support system implementation and process
transformation, through combination of
reporting relationships and service level
agreements.
? Introduce client / contractor role to manage
delivery arrangements.
Addressing line management
and accountability for
financial management
? Finance staff within HSCPs will be
accountable to the CFO as head of
profession and will have a “dotted line”
reporting relationship in place.
? The implementation of any new financial
management framework, system, process or
structure will be part of the Finance Reform
Programme and will be owned by the CFO
? FDs in HSCP will project manage
implementation within their area of
responsibility, reporting to the CFO through
the head of Operational Business Partnering
? Once financial management arrangements
are embedded and operating effectively,
“earned autonomy” will be deemed to be in
place and the relationship to the CFO will be
one of professional accountability.”
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The new Finance operating model for Health in Ireland
represents a fundamental change in financial management
practice and will enable Finance to deliver valued,
responsive and effective services in line with the system’s
changing needs. The CFO will:
? Define the financial management framework to be
followed;
? Provide trusted and timely information to support
decision making, in a standard and consistent way;
? Inform strategic and operational decision making
through trusted professional advice, insightful analysis
and decision support; and
? Ensure expected standards are maintained through
effective compliance and performance management.
The model is underpinned by a commitment to develop the
financial management capability of both finance staff and
budget holders to build a cost-consciousness culture and
change behaviours across the system.
5.1 Purpose
The operating model for financial management across the Irish health
system is designed to support the CFO in discharging his professional
accountability for financial management across the System and his
responsibility for establishing appropriate systems for financial control. It
draws on aspects of leading practice principles where appropriate and will
deliver a flexible, responsive financial management approach to meet the
changing demands of the system.
5.2 Vision and Design Principles
The Vision for Finance sets the context for the new Finance operating
model:
Finance will deliver valued, responsive and efficient services and adapt to the
Irish health system’s changing business needs. Finance will encourage
excellence, seek innovative solutions, take calculated judgements and work in
partnership with those who can help it achieve its goals. Finance will respond to
change and use it to release the potential in its people to really make a
difference.
5 NEW FINANCE OPERATING MODEL
FOR HEALTH IN IRELAND
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This aspiration will be underpinned by the following design principles which
set the framework for the detailed design:
? We have Trust in information, execution and judgement;
? Our flexible and resilient operating model is underpinned by finance
processes which are simple, standardised, understood, owned and
applied consistently;
? We focus on continuous improvement, delivering services our customers
need in the most effective way;
? Information is collected once and used many times;
? Self-service is common-place, bringing new responsibilities for all and a
renewed sense of ownership; as an employee, as a budget holder and
as a financial manager;
? We expect compliance to core processes and agreed performance
standards and the consequences are known and understood; and
? We recognise that our staff will make the new operating model for
finance a reality and we will make best use of their talents, skills,
knowledge and expertise.
5.3 A new Finance operating model
The new Finance operating model for Health in Ireland represents a
fundamental change in financial management practice and will enable
Finance to deliver valued, responsive and effective services in line with the
system’s changing needs
This approach is well established in finance functions in major organisations
across both the public and private sector, and its appropriateness for the
emerging health system in Ireland has been tested by considering the
characteristics of the services that finance provides. Further detail is
provided in Appendix F
Figure 11 outlines the key characteristics of the new Finance operating
model and these are discussed in more detail in the sections that follow.
“I would expect to see three facets in the modern and
efficient finance function: a strong specialist finance
function covering tax, treasury, corporate finance,
statutory reporting and central planning and analysis;
a central centre of excellence for transaction
procession to ensure accounting processes operate in
a consistent and cost effective way throughout the
group; and a business partnering function”.
ADRIAN MARSH, DIRECTOR OF GROUP TAX, TREASURY AND CORPORATE
FINANCE, TESCO PLC.
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Figure 11 The new operating model for Finance
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5.3.1 Customers
An appropriate level of service will be agreed with all organisational entities
across the system, ensuring a level of support which is commensurate with
the specific requirements of that entity, using a risk based framework to
assess need.
The CFO will prescribe the financial management arrangements appropriate
for each part of the system and will ensure that these are supported
effectively.
The quality of services provided to customers will be monitored and subject
to continuous review.
The customers in amber within figure 10 will have a more arms-length
relationship with the CFO than others supported, given the nature of the
entities concerned.
What this will mean in practice:
? Consistent levels of service;
? Consistent service quality and responsive services;
? CFO can give assurance that financial management is properly supported
across the system; and
? Budget holders will be supported in making strategic and operational
decisions which are informed by financial implications.
5.3.2 Service Delivery Model
There will be three distinct functions supporting service delivery in the new
finance operating model
? Operations Excellence:
? Finance Specialists; and
? Business Partners
The characteristics are illustrated in Figure 12 and explored in more detail in
the following paragraphs.
Figure 12: The New Service Delivery Model
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Operations Excellence:
Operations Excellence is the ‘finance engine room’ which will ensure that
the infrastructure is in place to deliver financial reporting and transaction
processing effectively and efficiently.
Operations Excellence will ensure that Finance Specialists and Business
Partners are equipped with the core financial information they need to do
their jobs well, and to add value to the business.
The ‘engine room’ will put in place processes, systems and controls to
deliver:
? Line of sight
? Single version of the truth
? Trust in data
? Effective transaction processing
? Assurance that financial management is supported across the system
? Assurance in relation to service quality and standards.
We envisage that operations excellence would include the following service
components:
Service Component Description
Service Management Service Strategy &
Development
Engaging with users to
identify new requirements
and defining how
operations excellence
services will support these
new requirements.
Planning future
development activity on
behalf of the CFO
Process Ownership Designing all processes to
support Finance activities
and ensuring they are
deployed in line with
requirements.
Approves all process
changes and variations
from standard.
Professional Standards Defining expected
professional standards
and ensuring processes
are in place to support
achievement of these
standards
Service Design and
Quality Assurance
Designing services and
ensuring alignment with
standard processes and
operational service
delivery
Supplier relationship
management
Managing Operations
Excellence Service
Delivery quality and
standards. Managing
relationship with national
shard services and
managed services
providers
Development and
management of service
level agreements
Service Delivery Business Intelligence Operations Excellence
providing management
information and data
analytics service to all
users across the system
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to support Budget Holders
and Business Partners
Financial Accounting and
Management Accounting
Shared Service
(Including Treasury, Vote
and Capital Accounting)
Providing routine
accounting services in a
consistent and
standardised way to
support Budget Holders
and Business Partners
Transaction Processing National Shared
Services providing an
Efficient and effective
transaction processing
service for all transaction
processing requirements
using defined standard
processes and integrated
financial management
systems
Financial Systems Managed Service
providing integrated
financial management
systems will Provision of
integrated financial
management system.
There is a clear distinction between Service Management and Service
Delivery. The CFO owns all aspects of Operations Excellence and will
define service standards, quality and own standard processes. The CFO
may, however choose to use other organisations to deliver aspects of the
services and will manage the delivery of services against agreed standards
through contractual arrangements with external suppliers and service level
agreements with other entities such as National Shared Services.
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What this will mean in practice:
? Defined standards and quality of service
? Standard processes deployed consistently across the system
? Service delivery being supported by those best placed to do so
? Defined professional standards and investment in skills to develop these
standards
? Centres of excellence to support routine standard accounting and reporting
functions to delivery consistent standards of service; and
? Ability to manage service quality through contractual relationships with
suppliers.
Finance Specialists:
The concept of finance specialists is well established in HSE – teams of
experts currently provide advice in areas such as taxation, external financial
reporting, treasury and corporate budgeting.
The new operating model proposes the strengthening of this capability,
improving the way it is delivered by centralising expertise and improving the
way in which advice and guidance is shared amongst the system.
Finance Specialists will provide deep technical skills and expertise providing
a single point of contact for expert advice. Services will be provided in-house
where appropriate, and will draw on the best advice available from the
professional services marketplace to ensure the right advice is provided.
Finance specialists will provide the following services:
? Financial strategy and planning;
? Corporate budgeting;
? Corporate financial management and reporting;
? Value for money;
? Governance and controls; including data governance
? Financial risk management and insurance; and
? Taxation.
What this means in practice:
? Centres of excellence providing expert advice;
? Consistent standard and quality of advice;
? Greater investment in skills and capability of team;
? Improved access to specialist services;
? More proactive role in decision making rather than reacting to issues arising;
? Reduced validation and manipulation of data through data standardisation;
? Simpler consolidation of financial information through fewer systems;
? Clearer line of sight as systems are rationalised; and
? Stronger control through rules embedded in systems and automated
exception reporting.
Business Partners:
Business Partnering will provide all decision support activity across the
system and will form the majority of WTE effort. The function will support
the CFOs responsibility to improve financial management decision making
and promote a culture of financial responsibility across the system. This
decision support will be forward looking in the main. Decision support is
concerned with providing financial advice to both internal and external
stakeholders to enable them to address policy and service delivery
challenges (both tactical and strategic). The advice is based upon deep
analytical capability, horizon scanning and scenario planning to provide
evidence-based and insightful analysis to support decision making.
Decision support will include the following services:
? Decision support for strategy and commissioning;
? Decision support to performance management; and
? The professional leadership of operational decision support.
There will be three distinct Business Partnering roles as per figure 13 below:
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Figure 13: Business Partnering Roles
The Performance Management Business Partner will be part of the
Planning and Performance team and be aligned with the RDPI structure.
Performance management arrangements will ensure that financial control is
maintained within a system which has earned autonomy.
The performance management business partners will support the RDPI in
the planning and performance management process, as part of a multi-
disciplinary Planning & Performance team. The performance management
business partners will receive a regional view of care group data from
Operations Excellence (as the provider of routine management information)
and holds reviews with the HSCPs in their region. These meetings will
enable the finance business partners to provide monitoring and evaluation
reports for their area overall and for each care group. The National
Directors’ finance business partners will draw upon these monitoring and
evaluation reports for major, escalated issues.
The Commissioning Business Partner will be the face of finance for the
National Directors and will be part of the National Director team. Their focus
is forward looking, engaging with business intelligence (a multi-disciplined
team of analysts), finance specialists and operations to develop scenario
plans and business cases.
The Operational Business Partners are the Finance Directors of the
HSCPs. They provide financial management support and are responsible for
all financial management within their organisation. Reporting to the CEO,
they are a key member of the HSCP management team.
HSCP Finance Directors will have professional accountability to the CFO
and will be required to operate within the terms of the financial management
framework.
Business Partners will receive Business Intelligence and routine
management and accounting support from Operations Excellence. This will
allow them to spend time interpreting the information and analysing results,
and then working in partnership with the business to solve business
challenges rather than preparing the core information requirements.
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High Level Organisation Structure
The service delivery model reflects the requirements of the new health
system and will be supported by the following high level organisation
structure:
Figure 14: Organisation Structure
5.3.3 Process, Governance and Controls
An effective financial management framework is required to provide
assurance to the CFO in relation to financial management practice across
the system.
Processes will be streamlined, simplified standardised and automated.
These changes will be underpinned by a single integrated financial
management system providing a clear line of sight. This will limit variation
and provide a consistent approach to most finance actions which in turn will
lead to a significant reduction in the required resources to carry out these
processes. This will facilitate the ownership of end to end processes within
finance and these freed up resources will then be allocated elsewhere.
The CFO will mandate all aspects of governance and controls. All HSCPS
are must comply with standards defined by CFO.
Embedded rules across the entire system will help alignment it with the
design principles effectively.
What this will mean in practice:
? Processes supporting financial management will be defined by the CFO and
deployed consistently across the system
? Adherence to governance and controls will be mandated; and
? Controls will be systems driven wherever possible making compliance simple
? A risk based approach will be deployed which is light touch and focused on
key areas of concern..
5.3.4 Information and technology
A single integrated financial management system will reduce the existing
complexity and eradicate the use of multiple systems. It will support the use
of tools such as business intelligence, patient level costing and excel to
radically improve the ways of working. It will be characterised by a standard
chart of accounts, consistent data definitions and standardised reporting.
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This will result in the production of timely, reliable management information
on which to base informed financial decision making.
The characteristics are as follows:
Data Governance
? Data ownership is clearly defined and data is respected as a corporate
asset;
? A common chart of accounts will be in place;
? A data dictionary will be created so that definitions are consistent;
? Coding structures developed for core feeder systems will be aligned and
integrated; and
? Standard reports for management accounting purposes will be
prescribed.
Financial Systems
? Period end closure will be automatic and timely;
? Month end reports will be circulated to budget holders very soon after
period close;
? Finance, HR and Procurement will all be integrated;
? Statutory and voluntary providers will operate on the one system which
will eliminate consolidation;
? Financial management practices will improve significantly due to the
embedded system based rules and controls.and the line of sight
provided by the single integrated system.; and
? Patient level costing will support service line reporting and operational
budgetary control.
What this will mean in practice:
? A single financial management system supporting HR, Procurement and
Finance processes will be deployed across the health system;
? Information and data governance to be owned by CFO;
? Single version of the truth;
? Trust in data; and
? Information to be collected once and used many times with financial reporting
and data analytics being delivered in a standardised, consistent way to all
users through Operations Excellence.
5.3.5 Skills and capability and culture and
behaviours
Skills and capabilities for specific roles will be defined and staff will be
supported to ensure that they have the right skills and capabilities to carry
out their role effectively. The following actions will be instigated in order to
achieve greater alignment between the actual and the desired skills and
capabilities within the system:
? A workforce development plan will identify the specific requirements
across the system;
? System-wide financial management awareness will be created by the
provision and completion of course by both finance and non-finance staff.
Budget holders and service managers will be trained and supported in
financial management, but will be expected to take ownership of their
budget and their performance will be assessed accordingly;
? A compulsory Continuous Professional Development (CPD) programme
supported by learning and development plans will be enacted;
? Defined skills and capabilities for senior roles will be established; and
? A programme of performance management will be created supporting
desired behaviours. This will reward positive behaviours but will also
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have the support of the CFO to take action when undesirable behaviours
are discovered.
Perhaps the greatest challenge being faced is in changing culture and
behaviours across the health system. The effective implementation of these
actions will drive change in existing behaviours.
What this will mean in practice:
? Skills and capabilities mandated for key finance roles;
? CPD compulsory for all finance professionals; and
? Learning and development for both finance professionals and non-financial
managers to be recommended and supported by CFO.
5.3.6 Conclusion
This operating model represents a fundamental change from the existing
financial management practices. The work required to achieve it should not
be underestimated. The following chapter explores the strategy for
implementation..
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The scope and scale of change required to implement a
new operating model for financial management across a
changing health system should not be underestimated.
Consequently, a phased approach to implementation
which recognises both the changing environment and the
need to maintain business continuity in such a critical area
as financial management is key.
In this chapter we describe the steps required to support
the transition from the current way of working to a fully
reformed finance operating model and the implementation
steps required to deliver a successful outcome.
6.1 Essential components of the new
operating model
The future operating model for Finance is only achievable if the following
components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and facilitating
effective self-service principles;
? Trusted financial management information which supports effective
decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance management
arrangements which reward good practices and provide sanction where
appropriate.
The Finance Reform programme will deliver these components over time,
but there is a need for interim changes to the financial management
operating model to support the system during this transition period,
delivering the reform programme whilst ensuring that systems of financial
control remain robust and effective during transition.
This is particularly important given:
? Many commissioned reports, including the C & AG Audit report that the
current financial systems are not fit for purpose;
? The recent establishment of ‘National Directors’ and the immediate
necessity to prepare financial systems to deliver on their requirements;
and
? The overall transition, in the next few months, from the current reporting
structures and the need for continuity of financial reporting through this
change, while ensuring financial integrity.
6 IMPLEMENTATION STRATEGY
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6.2 An incremental approach to change
To ensure that the changes envisaged as part of this complex change
programme are implemented whilst ensuring business continuity, a two
stage interim operating model will be put in place for a period of up to 3
years. The approach is illustrated in figure 15 below, and the key aspects of
the approach explored in more detail in the following paragraphs.
Figure 15 The transition steps towards a future operating model
6.3 Step 1: An interim organisational
structure
As a first step towards reform, an interim organisational structure will be
established with effect from 1
st
October 2013, and will be operational until
such time as the following conditions are achieved:
? ISA review outcome is known;
? Interim BI reporting solution in place;
? New system requirements defined; and
? The future role of Shared Services confirmed.
The proposed high level organisation structure is presented below.
Figure 16 The interim organisational structure
Given the degree of uncertainty with regard to the future shape of the
provider landscape, coupled with a need to support the new structures whilst
maintaining stability and financial probity within existing operational
arrangements, the Business Partner will be introduced incrementally, with
the first step being to consolidate existing regional financial management
into an effective East Coats and West Coast / South split.
It is anticipated that this interim arrangement will be in place for a period of
between 6 to 9 months at most.
6.4 Step 2: A transitional operating model
In this section, we describe the key elements of the transitional operating
model, outlining the key change initiatives required to deliver the new
operating model over time, and how that change will be supported whilst
ensuring financial probity and reporting requirements continue to be
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supported during the transition. Figure 17 summarises the key transition
projects required to support the changes required to each of the component
parts of the new operating model, and these are explored in detail in the
sections that follow.
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Figure 17 The transitional operating model for Finance
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6.4.1 Customers
The Emerging HCA:
As the new structures evolve, financial management arrangements will
require to be introduced to support this. There is an immediate need to
support the National Directors in their new role, and in providing the
resources, management information and support to the Regional Directors
of Performance and Integration (RDPIs) in supporting planning and
performance management activity.
National Services:
There is inconsistency of support across National Services, and this has
been recognised recently with the secondment of an Assistant National
Director of Finance to PCRS. During the transition to the new operating
model the provision of financial management support to other National
Services will be reviewed, and resources deployed based on relative need,
taking into account the complexity and financial management challenges of
the service concerned, the extent of change to be supported and the
financial risk to the system as a whole.
The Department for Health:
Links with the Department will continue to be supported and will become a
key area of focus during the transition as the vote is transferred.
The Department for Children and Youth Affairs:
DCYS will continue to be supported during the transition period and beyond.
6.4.2 Service Delivery Model
The Transitional Service Delivery Model will be introduced over time, and
will build on the elements already in place, and provide additional support to
the emerging organisations as the transition progresses. It will provide the
infrastructure to address the immediate priorities for improvements in
financial management practices essential in the short term, support the
longer term reform agenda and continue to address the financial
management challenges of current operations.
The following interim structure will support the service delivery model, and
roles and responsibilities are outlined in the table that follows.
Figure 18 Transitional Management Structure
These are key leadership roles within Finance and those in these posts will
have clear responsibilities for both service delivery and reform. They will
have a clear change leadership role, and will need supported and developed
to deliver that role effectively.
The key roles and responsibilities of each post are in the table that follows.
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Table 7: Roles and Responsibilities within the Transitional Operating Model
Role
Responsibilities
Finance Reform Lead
Office of the CFO ? Providing support to the CFO to enable the discharge of his accountability for financial
management across the system.
? Support to the CFO in engaging with the wider reform agenda
? Support to the CFO in transitioning to his new role
? Support to the CFO in engaging with key stakeholders and the political system,
including reporting to DH, DPER and Cabinet and engagement more broadly.
? Finance Reform PMO
Head of Business
Partnering (Operations)
? Programme management of transition projects to introduce effective financial
management arrangements in HSCPs
? Professional leadership of Hospital Group / ISA Finance Directors
? Liaison with wider finance family as required
? Hospital Group formation
? ISA review
? MFTP: operational implications
Head of Business
Partnering
(Commissioning &
Performance)
? Provision of Business Partnering support to National Directors to support their strategic
role as Care Group budget holder, and to support commissioning and service
improvement objectives
? Provision of Business Partnering support to the COO and Regional Directors of
Performance and Integration to support the planning and performance management
arrangements of the organisation.
? Standardised and simplified processes for
business partnering
? Design and development of dashboard based
exception reporting
? Design of engagement model with customers and
other aspects of finance
Head of Finance
Specialists
? Managing the provision of specialist finance services across the system (Tax,
Insurance and Risk Management, Corporate Budgeting)
? Building the capability in financial strategy and planning
? Relationship management with Department of Health(excluding Vote & Treasury)
? Data governance and financial controls
? Engagement with other government departments
? Design of new financial management framework
? Data governance and controls
? MFTP: governance, controls, process, standards
? Resource allocation
? Commissioning infrastructure
Head of Operations
Excellence
? Process design and service standards
? Business Intelligence and Financial Reporting
? Financial Accounting( including Vote and Treasury)
? Management Accounting
? Shared Services development
? Transfer of Vote
? Establishment of Business Intelligence capability
? Establishment of Accounting Centre of Excellence
to support routine financial and management
accounting activities
? Ownership of the design of end to end processes
? Commissioning a new integrated financial
management system
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6.4.3 Process Governance and Controls
The transitional operating model will support the move to a mandatory
compliance regime supported by system based controls. Work can progress
in developing the financial control framework and in developing the
performance management framework to support it.
There is also a good opportunity to explore ways in which improvements in
transaction processing efficiency can be harnessed ahead of any system
implementation by simplifying contractual arrangements, consolidating pay
scales, payrolls and rationalising the supplier base.
Design and development of new end to end processes which minimise
variation from standard system templates, and support front-end automation
and self-service can also be progressed.
6.4.4 Information and Technology
There will be an immediate need to address reporting requirements to
support the new performance management arrangements, Care Group
reporting and the new hospital groups.
It is likely that a Business Intelligence led short term solution adopting Big
Data technology will provide the best option to address the transitional
reporting requirements. Big Data means taking large amounts of data from a
range of sources and using analytical tools to draw out business insights at
low cost. These solutions can be implemented rapidly and across disparate
systems. Appendix D contains case studies for Big Data.
Meanwhile the design and development of a single chart of accounts and
coding structures for procurement and HR will make a significant
contribution towards the final requirements for a single system.
Analysis by the Senior Finance Team (Appendix H refers) concluded that
the current business case for a new financial system does not meet the
future requirements of the system and will not deliver an optimum solution.
A business case for a managed service to provide an integrated HR,
procurement and finance system capable of meeting the future requirements
of the system should be progressed as a matter of urgency
In developing plans for the future in relation to Information and Technology it
is important to maintain a link with, and to involve the Strategic ICT Group
as part of this process. This will ensure that proposals fit with the developing
ICT strategy for the system and that requirements across the entirety of the
system are consistently defined and addressed effectively.
6.4.5 Skills, capabilities, culture and behaviours
The focus will be in addressing skills and capability gaps to prepare finance
staff and financial managers for their new roles.
There will be a significant workforce agenda, to design roles, appoint staff to
posts, and to support their learning and development.
At the same time, there is a need for significant engagement with the Budget
Holder community to set expectations and to provide support to them as a
culture of cost consciousness is developed.
6.4.6 A programme management approach to ensure
operational alignment with new operating
model design
The emerging health landscape and legacy challenges means that finance
will be embarking on a substantial and wide-ranging change programme.
There is therefore a transition period as finance moves from the current
situation to a new ‘business as usual’ operating model.
This transition period requires the definition of a programme of work which
will establish the financial management framework. Managing this change
will require a strong programme management approach to ensure that the
mandated requirements of the operating model are achieved, and that the
CFO can be assured that financial management arrangements are fit for
purpose within parts of the System over which he has no direct control.
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To facilitate this we recommend that the introduction of any new financial
management framework, systems, processes, structures and supporting
service line management is managed as part of the Finance Reform
Programme, where the CFO is the Senior Responsible Officer (SRO).
Programme and Project management arrangements consistent with those
proposed to support overall System Reform will be put in place.
The HSCP FD will accountable to the CFO/SRO for project delivery,
consistent with the CFO’s role as head of profession. In practical terms this
responsibility will be carried out by the Head of Business Partnering
(Operations) on behalf of the CFO.
This ensures the CFO has the necessary control over how financial
management is set up and delivered, to ensure that the framework is
complied with, and through professional accountability, has the ability to
step in if standards slip, and more positively be able to provide
whistleblowing support / advice and support where they feel their
professional responsibilities around financial management are being
compromised.
6.5 Implementation success factors
Our engagement has identified four key implementation challenges which
must be addressed explicitly to ensure that the Finance Reform programme
can achieve a successful outcome. Tackling these issues will also go a long
way to securing the buy-in and commitment of key players across the
financial management community whose involvement is critical for success.
6.5.1 Demonstrating intent and ability to deliver
From discussions with the Senior Finance Team it is evident that the
financial management community wants to see evidence that change will
happen and there remains a degree of scepticism that there will be any real
change in the short to medium term arising from this work. This is largely
based on previous experience and in relation to the financial system
replacement in particular.
In reality there are a number of factors in play which provide the “perfect
storm” necessary to drive the changes necessary:
? Universal recognition of the need for change;
? Broader system wide reform introducing new requirements;
? Cross departmental senior leadership support and ownership, through
the Finance Reform Board;
? A commitment through the Memorandum of Understanding with the
Troika to deliver a new financial management system; and,
? The appointment of the CFO as the first step in driving changes in
financial management practices across the system.
These factors provide the conditions for change and require that the CFO
takes steps to demonstrate intent to the system as a whole. This can be
achieved in the following ways:
? Assuming professional responsibility for all staff with a substantive
finance role during the transition period. This would include staff currently
employed across the statutory and voluntary sector at present and is
intended to facilitate the scope and scale of change required across the
system.
? Providing a clear statement of intent in the extent of prescription required
in respect of the financial management framework to provide assurance
in respect of his accountability for system wide financial management.
? Making explicit the expectations placed on budget managers in the
context of financial management and providing an infrastructure to
support them in meeting these expectations.
? Providing clarity regarding the consequences of failing to meet
expectations in this respect; and ensuring that performance management
arrangements are in place, and to ensure that management responds
through action in addressing aspects of poor performance.
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6.5.2 Business Case and approvals
Securing business case approval for any significant investment is seen as a
barrier to change based on the experiences of recent years in seeking
approvals to proceed in respect of new financial system investment.
The need to demonstrate a case for investment is essential, and that case
must be expressed in the context of wider system reform and support the
requirements of the future health system, not just address the short term
challenges facing the statutory sector.
The commitment to the Troika reinforces the priority to be placed on this
exercise, and it is suggested that the business case for a new Integrated
Financial Management System (which should consider HR, Payroll,
Procurement, Income and general ledger requirements, and the requirement
to interface with patient level costing solutions) should be progressed as a
matter of urgency in consultation with CMOD (Centre for Management and
Organisation Development) (who should be asked to commit to a short
timeframe for approvals) and with the support of the Systems Reform Unit.
As a key enabler of the new operating model for financial management in
Health, the case for investment in a new system should not be considered in
isolation, rather needs to support the overall shift in resources required away
from transaction processing into decision support essential to delivering the
desired financial management practices required. As such it should form
part of a wider business case to support investment in the overall Finance
Reform programme.
6.5.3 Workforce issues
The success of the new operating model depends on the ability of the
system to:
? Undertake a significant role design exercise and to appoint staff to new
roles in an appropriate, transparent manner, ensuring that the roles are
resourced with individuals with the right skills and capabilities to carry out
the role effectively.
? Redeploy resources across the system to facilitate the transfer of effort
from transaction processing to decision support. This may involve
changes in location and in job function.
? Ensure that there is a succession plan in place to develop future finance
technical specialists, business partners and leaders and to ensure
effective knowledge transfer arrangements are in place.
Given the extent of the workforce issues to address it is recommended that
dedicated HR resources are provided to support the Finance Reform
programme.
6.5.4 Resourcing the programme
The business or business requirements are best defined by those working in
that business; it is critical for the success of the programme that the next
phase of work is owned by the CFO and that key players from across the
financial management community play a key role in delivering the
programme of work required.
This highlights a number of challenges which need to be overcome:
? Staff supporting financial management across the system are under
pressure with existing workloads. Adding to that pressure would be
counter-productive.
? There needs to be a continued focus on the business of financial
management during the transition, and key individuals likely to be
required to support any change programme are also likely to be critical to
the success of business as usual.
? It is likely that delivering the programme effectively wil require a
combined team of HSE staff supported by external consultancy support.
This will require investment over an 18 month to 2 year period to meet
the cost of external consultancy and to provide cover for key individuals
currently supporting core business as usual functions whilst they are
seconded to the programme team.
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6.6 Implementation plan
This section outlines the implementation plan to deliver the programme of
work required, providing clarity in respect of the scope and scale of change
required and the wider milestones driving the pace of change.
6.6.1 Key milestones driving the pace of change:
The diagram below highlights the current view of the key milestones from
the wider System Reform programme which drive the pace of change
required for Finance Reform.
6.6.2 High level programme roadmap
There are four key workstreams to the programme going forward:
? Programme Management: to ensure that all aspects of the programme
deliver as planned, and that risks and issues are tracked and managed
and mitigated, dependencies known and understood;
? Supporting Interim Arrangements: tactical projects to address
immediate new requirements and weaknesses in current financial
management practices prior to the move to the transition period;
? Supporting Wider Finance Reform: projects with a core finance
component which form the basis of the Finance pillar of System Reform;
and
? Delivering the new Finance Operating Model: key projects to deliver
the longer term model for financial management for a new health system.
A high level programme roadmap is presented below, and the key activities,
resource requirements and dependencies are discussed in later sections.
2013 2014 2015 2016
UHI in place Hospital Trusts
established
MFTP Live Hospital Groups
f ormed
MFTP Shadow
Tarif f s
Community
Trusts
established ?
HCA f ormed Interim structure
in place
MFTP
inf rastructure
designed and
implemented
Vote
Transf erred
ISA Review NIPO
Established
2014 Service
Planning and
Budgeting
? Care groups
? Shadow Tarif fs
? Resource
Allocations
? Commissioning
Approach
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Figure 19 High level road map
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6.6.3 Programme Management
An appropriate programme management infrastructure with reporting links into the System Reform Unit is an essential component for success. The following
arrangements are recommended:
Task Group Key Activities Resource Requirements Dependencies
Programme
Management
? PMO
? Progress reporting
? Risk and issue management
? Resource deployment and management of
external consultancy support
? Benefits realisation
? Communications
? Programme Manager
? PMO support
? Access to external support as required to
supplement internal resources
? Access to HR / IT / Comms support as
required
? Alignment with and links to the system reform
unit
? Sufficient internal resources to manage and
deliver the projects within the programme
? Ability to prioritise and redirect resources
currently deployed on project management
activity, and which is not contributing to the
overall objectives of the programme.
6.6.4 Supporting Interim Arrangements
Task Group Key Activities Resource Requirements Dependencies
Planning and
Budgeting 2014
? Medium term financial outlook to inform
direction of travel
? Cost containment strategy to inform DH
discussions with DPER
? Resource allocation approach and link to
shadow tariff development
? Establishment of Care Group Budgets
? Contingency planning
? Internal project team
? Access to external support as required to
supplement internal resources
? Contributions from senior management
? Engagement with DH
? MFTP approach in respect of shadow tariffs
? Government spending plans over medium
term
Financial
Reporting: Interim
Arrangements
? Identify requirements to report on a cash and
income and expenditure basis by care group
? Identify approach to provide balance sheet for
each hospital group
? Identify approach to support MI requirements
of national Directors and RDPIs to support
planning and performance management
arrangements and dashboard reporting
? Identify approach to provide consolidated MI
across statutory and voluntary providers to
support hospital groups
? Consider whether CRS can deliver
? Project manager
? Contributions from the following key business
areas:
? Corporate Budgeting and reporting
? Cash and Treasury
? Financial Accounting
? Management Accounting
? Business Partners supporting National
Directors / RDPIS / Operational
? BI / MI expertise
? Links with COMPSTAT
? Availability of financial information
? Suitability of CRS
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Task Group Key Activities Resource Requirements Dependencies
requirements or whether “Big Data” approach
is required
? Implement new reporting requirements
? Head of Planning & Performance Management
? Access to external resources to provide
leading practices in business intelligence and
to support the project
Process,
Governance and
Controls
? Consider an interim solution to support
requisition management aiding non-staff cost
control and compliance with national contracts
and frameworks
? Internal project team to be established
? Project manager
? Access to key staff from the following areas:
? Procurement
? Finance
? IT
? Access to external support to provide review
and challenge
? Work underway within Procurement
? Timeframes for roll-out of integrated financial
management system
6.6.5 Supporting Wider Finance Reform
Task Group Key Activities Resource Requirements Dependencies
Money Follows the
Patient
? Define process, governance and controls
? Establish infrastructure
? Patient Level Costing system design.
procurement and implementation
? Establish NIPO
? Tariff Setting
? Establishment of payment mechanism
? Link to budget allocations
? Design interfaces with policy setting and
? Establishment of payment mechanism
? Modelling impact of tariffs on commissioning
intentions
? Multi-disciplinary team with representation
from both the Department, the HSE as
commissioner and of provider organisations
? Finance
? IT
? Clinical / operational expertise
? Shared Services: to inform transaction
processing requirements and delivery
mechanisms
? Decision on provision of financial systems
? Decision on scope of payments element of
shared services
? Decision on role of NIPO
? Decision on scope of shadow tariff process
and wider resource allocation approach.
? Understand activity levels and forecast
demand to inform commissioning intensions
? Medium term strategic plan, both operational
and financial to inform commissioning
intentions and direction of travel
Hospital Group
Formation
? Understand impact of shadow tariffs on
potential funding levels and establish cost
reduction target to be achieved through
reconfiguration
? Support integration of hospital operations
across the group structures
? Implement new Financial Management
? Project teams from each group
? Operations support
? HR support
? Financial Management expertise to implement
service line reporting arrangements
? Shadow tariffs
? 2014 resource allocations
? Understanding of transition arrangements
towards financial stability
? Commissioning intensions from National
Director
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Task Group Key Activities Resource Requirements Dependencies
arrangements ? Visibility of financial and operational
management information across the group
structures
ISA Review ? Understand impact of shadow tariffs on
potential funding levels and establish cost
reduction target to be achieved through
reconfiguration
? Support integration of community
organisations across the new structures
? Implement new financial management
arrangements
? Project teams from each group
? Operations support
? HR support
? Financial Management expertise to implement
service line reporting arrangements
? Shadow tariffs and / or 2014 resource
allocations
? Understanding of transition arrangements
towards financial stability
? Commissioning intensions from National
Director
? Visibility of financial and operational
management information across the group
structures
6.6.6 Delivering a new operating model for Finance
Task Group Key Activities Resource Requirements Dependencies
Service Delivery
Model
? For each component of the service
delivery model (business partners,
specialist finance and operations
excellence, develop detailed design for
the:
? A) interim model;
? B) transitional model; and
? C) future operating model for finance..
This will involve:
? Detailed organisation structure
? Role description, job specifications,
person specifications
? Service standards
? Processes and procedures
? Implementation
? Appointments process
? New processes and procedures
? Skills and capability development
? HR to support workforce / IR issues
? Organisation design / finance leading practices
expertise
? Process specialists
? Pace of change dependent on wider
structural reform and will align to
establishment of new organisations
? Decision on financial system
? Timeframe for interim solutions?
? Decision on shared services strategy:
timeframe for consolidation of operations and
delivery of services to Hospital Groups and
ISAs from Shared Services
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Task Group Key Activities Resource Requirements Dependencies
Process, Governance
and Controls
? Design common standardised processes
with limited divergence from system
standards
? Focus on front – end of the process
which will impact on service operations
and develop approaches which will
remove manual processing, drive self-
service and interface with core
operational systems such as rostering to
improve operational efficiency
? Define system based control
requirements and specify requirements
? Develop infrastructure to support the
sharing of guidance and information
? Develop on-line and face to face training
to support budget holders
? Revise and Develop IMRs to reflect
revised processes and procedures
? Design and develop an approach for
exception reporting
? Implement common processes
? Launch guidance and support framework
? Support learning and skills development
? Process specialists
? IT / systems support
? Operational staff
? Internal audit
? Governance and controls
? Decision on core systems
? Clarity regarding function and form of new
organisations
? Interaction with other projects to implement
operational systems e.g. rostering systems to
drive automation
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Task Group Key Activities Resource Requirements Dependencies
New Financial System
? Identify critical requirements
? Detailed Design to include:
? Chart of Accounts
? Coding structures for HR, Procurement
and GL
? Data definitions
? Reporting requirements
? MFTP patient level costing
? Develop strategy to reduce the volumes
of transactions and complexity of grading
structures etc (payroll, AP and
procurement)
? Procurement of managed service:
? HR, Finance, Procurement, PLC. MI and
Business Intelligence
? System configuration
? System roll out
? Process specialists:
? HR
? Procurement
? Finance
? IT / systems support
? Financial Accountants
? Management Accountants
? Operational staff
? Internal audit
? Governance and controls specialists
? Decision on financial system investment
? MFTP system selection and approach to
costing
Skills and Capabilities
? Confirm desired skills and capabilities to
support the new service delivery model
? Confirm skills and capability gaps and
priority areas for development
? Develop learning and development
strategy and supporting materials for
both e-learning and classroom based
support
? Develop support to build the skills and
capabilities of Budget Holders and other
non-financial managers in financial
management
? Form and develop the wider Finance
Community and build communities of
practice to develop skills and capabilities
? Open Irish branch of HFMA to support
finance community and leverage the
infrastructure in place
? HR / Workforce development support
? Finance leading practices expertise
? Securing investment in skills and capability
development
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Task Group Key Activities Resource Requirements Dependencies
? Trainee Programme
? Selective recruitment to build capability
in key areas
Culture and
Behaviours
Both within Finance and across the
wider Health System
? Identify desired behaviours and how
success will be measured
? Identify key messages and actions which
will make an immediate impact and plan
their execution
? Support desired behaviour changes
through skills and capability development
? Incorporate measures within
performance management arrangements
? Demonstrate success and build
momentum
? Share outcomes and lessons learned
? Celebrate success
? Dedicated resources to support change
management as part of the programme
? Access to external support
? Support from Corporate Communications
? Nominated Change Champions to “walk the talk”
across the system
? Performance Management in place
? Investment in learning and development
? HFMA relationship developed
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6.7 Planned Outcomes: Year 1
Being seen to deliver against plan and to make incremental steps towards the desired end position in a manner which both builds momentum and secures
buy-in from both users of finance and those within the financial management community is essential for success.
Having clarity of purpose and a time-bound set of milestones to achieve is a key enabler of this, as is the adoption of a rigorous project management approach
to oversee programme delivery.
Planned outcomes, for the next twelve months, in quarterly intervals are shown below will assist in managing delivery. Communicating the successful
achievement of these goals is important to raise the profile of the programme and to celebrate the contribution made by the team to the overall objective.
Task Group Q4 2013
(Oct –Dec)
Q1 2014
(Jan-Mar)
Q2 2014
(Apr-Jun)
Q3 2014
(Jul-Sep)
Programme Management ? Phase 2 Plan agreed
? TOM Agreed
? Securing budget to resource
team to deliver programme
? Programme support in place
? Project roles resourced
? Key posts backfilled
? Progress reporting
? Risks and Issues
? Dependencies
? Benefits
? Skills transfer plan agreed
? Progress reporting
? Risks and Issues
? Dependencies
? Benefits
? Skills transfer underway
?
MFTP Delivery ? Team mobilised
? Approach agreed
? Shadow tariffs modelled
? Resource allocation strategy
developed
? Shadow tariffs in place
? Performance reporting
aligned with tariff approach
? Q1 review
? Assess tariffs and pricing
? Revision plan agreed
Hospital Group Delivery ? Programme management
arrangements in place
? Team mobilised
? Professional alignment of
Finance staff to CFO
? Transitional arrangements
planned
? Group financial reporting
arrangements in place
? SLM developed
? Shadow tariff regime / patient
level costing approach in
place.
? Shadow tariffs in place
? Performance reporting
aligned to tariff approach
? Q1 review
? Assess effectiveness of
financial management
arrangements
? Revision plan agreed
ISA Reform ? Team mobilised
? Approach agreed
? Group financial reporting
arrangements in place
? Q1 review
? Assess effectiveness of
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Task Group Q4 2013
(Oct –Dec)
Q1 2014
(Jan-Mar)
Q2 2014
(Apr-Jun)
Q3 2014
(Jul-Sep)
? Finance staff aligned to CFO
? Transition arrangements
planned and agreed
? SLM developed to support
financial management and
control
financial management
arrangements
? Revision plan agreed
UHI Implementation ? Team mobilised
? Approach agreed
? Design work underway
2014 Planning & Budgeting ? Three year financial strategy
developed
? Cost of Reform developed
? Cost Containment Strategy
agreed
? Resource Allocations by
Care Group
? Shadow Tariffs
? Agree service plans in line
with revised management
arrangements
Interim Reporting ? Team mobilised
? Approach agreed
? Appraisal of options for
reporting
? Big data implementation
? Reports designed and tested
? New reporting in place
Future Systems ? Confirmation of strategy
? Business Case for managed
service for HR, procurement
and finance system approved
? PIN notice issued
? Critical requirements
identified
? Chart of Accounts and HR,
Payroll and Procurement
coding structures designed
? System Design continues
? Procurement underway
? Supplier negotiations
? Preferred supplier identified
? Contractual negotiations
? Contract concluded
? Configurations underway
? Roll-out to commence
Service Delivery Model ? Interim Heads of Function
roles in place
? Appointments to Business
Partner roles
? Appointment to Finance
Specialists roles
? Roll out to commence
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Task Group Q4 2013
(Oct –Dec)
Q1 2014
(Jan-Mar)
Q2 2014
(Apr-Jun)
Q3 2014
(Jul-Sep)
? Relationship and way of
working with National Shared
Services agreed.
? Detailed design completed
? Job roles and person
specifications developed
? Appointment to Finance
Reform roles
? Backfilling as required
? Appointment to Operations
Excellence roles
Process, Governance &
Controls
? Define data governance
arrangements
? Define controls framework
and approach
? Support process and Chart of
Accounts design activity
? Build BI capability
? Develop Accounting Centre
of Excellence
? Develop risk management
plan and governance
approach for Finance Reform
? Support suppliers
negotiations for new systems
? Advise on reporting ,
governance and controls
requirements
? Act as client for new system
implementation
? Act as client for process
redesign
Skills & Capabilities ? Skills and capabilities defined
? HFMA link agreed
? CPD plan in place
? Learning and Development
plan in place
? First cadre of Business
Partners trained
? First cadre of Budget Holder
training supported
? Review of Q1
? Agree plan for next 12
months
Culture & Behaviour ? CFO in post
? Engagement with key
stakeholders
? Communications with health
system to define
requirements for financial
management and share new
operating model proposals
? Performance management
expectations made clear
? Reward and sanction defined
? Communication and
engagement
? Business Partners in place
? Support to Budget Holders
provided
? Communication and
engagement
? Review of Q1
? Agree plan for next 12
months
? Communication and
engagement
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6.8 Critical Success Factors
In taking this initiative forward it is important to learn from others to ensure
that the programme is best placed to succeed. The critical success factors
and how these will be achieved are outlined in table 8.
The programme set out in this section is aimed at radically transforming the
overall financial management across Ireland’s health sector and
underpinning broader health reform in line with Government aspirations. The
overall plan identifies the need for significant and positive action in the
immediate months ahead and the success of the overall programme will
likely be defined by these actions.
Table 8: Critical Success Factors
Critical Success Factors How this will be achieved
Clarity of Vision
? As articulated within this document
through the high level design of the
Finance Operating Model
Strong Leadership
? Through the Finance Reform Board
and the sponsorship of the CFO
Capacity and capability to implement
the Vision
? Back-filling key roles to free up
capacity to support the programme
? Securing budget and investment to
address capability and capacity
gaps from external consultancy
support
Effective Project and Programme
Management
? Appointing a programme manager
from within the senior management
team
? Establishing a programme
management infrastructure
? Ensuring that the programme
remains properly resourced
Ownership within the business
? Involvement of key players from
financial management community
? Lead roles in delivery of key
projects
Effective communications and
sharing success
? Communications role within the
programme infrastructure
? Website to share information more
widely
? Events to celebrate success
Promoting an environment which
encourages innovation and a
considered approach to risk.
? Within the context of effective
project management and risk
management and mitigation in
place, encourage action and
recognise that a partial outcome is
better than none.
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A new Finance operating model is essential to support the
emerging financial management requirements of Future
Health and to provide confidence to key stakeholders that
the Health budget is being used wisely and well to deliver
quality, safe and sustainable services to patients. The new
model represents a fundamental change in financial
management practice and the extent of change required
should not be underestimated. Consequently, a phased
approach to implementation which recognises both the
changing environment and the need to maintain business
continuity in such a critical area as financial management
is key
Phase 2 of the Finance Reform Programme will radically transform financial
management across Ireland’s health sector and will underpin broader health
reform in line with Government aspirations.
The future operating model for Finance is only achievable if the following
components are in place:
? A single financial management system providing line of sight and
supporting embedded controls, standardised processes and facilitating
effective self-service principles;
? Trusted financial management information which supports effective
decision making; and
? Budget holders who are supported in undertaking their financial
management responsibilities and appropriate performance management
arrangements which reward good practices and provide sanction where
appropriate.
The Finance Reform programme will deliver these components over time,
but there is a need for interim changes to the financial management
operating model to support the system during this transition period,
delivering the reform programme whilst ensuring that systems of financial
control remain robust and effective during transition.
Our work to date has started the change journey by building real consensus
amongst the finance community. There is a shared understanding of the
need to change and a commitment to make that change happen.
A quarterly milestone plan to support the next twelve months has been
developed as part of a three year change programme. The plan identifies
the need for significant and positive action in the immediate months ahead
and the success of the overall programme will likely be defined by these
actions
This report recommends a new Operating Model for Finance and seeks
approval to progress with Phase 2 of the Finance Reform programme as
outlined in the Implementation Strategy with immediate effect.
7 CONCLUSIONS
91
CONFIDENTIAL – between PA and The Health Service Executive
A SHAPE OF FINANCE 92
A.1 Introduction 92
A.2 Process analysis 93
A.3 Duplication of process activities 94
A.4 Fragmentation 97
A.5 Activity profile of core processes 97
A.6 Cost Analysis 98
A.7 Grade Analysis 104
B TRAINING NEEDS ANALYSIS 111
B.1 Introduction 111
C EMERGING HOSPITAL GROUPS 115
C.1 Introduction 115
C.2 The emerging group structures 115
C.3 Steps towards a new operating model 116
C.4 Dublin East 117
C.5 South / South West Error! Bookmark not defined.
C.6 Dublin North East 119
C.7 Dublin Midlands 120
C.8 West / North West 121
C.9 Mid West 122
D CASE STUDIES 123
D.1 Business partnering 123
D.2 Shared services 126
D.3 Big Data 126
E OPTIONS APPRAISAL 129
E.1 Introduction 129
E.2 Compliance 129
E.3 Transaction processing 137
E.4 Business Partners 143
F ORGANISATION DESIGN 145
G BUSINESS INTELLIGENCE 148
H SENIOR FINANCE TEAM VIEW OF CURRENT
INFORMATION SYSTEMS 150
I KEY STAKEHOLDERS CONSULTED 151
APPENDICES
92
CONFIDENTIAL – between PA and The Health Service Executive
A.1 Introduction
The Shape of Finance survey was designed to capture the amount of whole
time equivalents (WTE) involved in finance processes. The combined
results allow an analysis of the proportionality of services – decision support,
compliance and transaction processing across finance in terms of time and
cost. The survey was completed by the relevant Assistant National Directors
of Finance, Finance Managers in statutory hospitals and community,
Finance Directors in voluntary acute hospitals and Finance/Administration
managers in voluntary community agencies on behalf of their teams.
The survey provides a high level structured view of the current service
delivery model for finance across the System. This highlights how resources
can be utilised more effectively. Leading practice trends free up resources
from transaction processing to enable investment primarily in decision
support but also compliance where necessary, and to reduce the overall
size of the finance team. This is achieved by further automation of
transaction processing, simplification and standardisation of processes and
embedding controls in systems.
Section A7.1 below contains a breakdown on the templates received and
included in the analysis. The survey was sent out on Monday, May 20th with
participants being requested to complete it by Friday, May 31st. The initial
response was poor and an extension was provided till Monday, June 17th.
Responses continued to come in till the date of this submission but those
received after Monday, June 24th have not been included.
Overall, responses received covered 1,628 staff (1,273.5 WTE). This
includes staff employed directly within National Finance, and those in local
finance functions in National Services, and in HSCPs from both the statutory
and voluntary sector.
? The estimated cost of headcount involved in finance processes is
€74m.
10
This cost is a ‘full cost basis’ comprising salary, salary on-
costs for PRSI and pensions, and overheads consumed (such
accommodation, technology and training) and equates to 0.55% of
total HSE expenditure of €13.68bn. This figure only relates to the
templates returned so the actual figure is higher.
In total 136 template returns were included in the analysis:
? 23 of the 32 LHOs
? 9 of the 38 S38 community providers
? 20 of the 29 statutory acute hospitals
? 9 of the 16 S38 voluntary acute hospitals
? 7 for national services such as regional corporate finance and
National Shared Services
10
Blended rate of 8% for PRSI, 9% for Pensions and 20% for overheads
A SHAPE OF FINANCE
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CONFIDENTIAL – between PA and The Health Service Executive
In the following sections, we analyse the data at by process, activity, cost
and grade.
A.2 Process analysis
Total finance headcount and WTE was analysed by core processes
(decision support, compliance and transaction processing), non-core finance
processes and other non-finance processes.
Figure 20: WTE by core and non-core finance processes
? This analysis shows that 54% of effort (WTE) is expended on
transaction processing, 16% is on compliance and 15% is on
decision support.
? The analysis also shows that around 14% of effort (180 WTE) is
expended on non-core finance processes – corporate governance,
line management, general administration and finance related
project work.
? Around 53% of the non-core time is spent on general
administration (95 WTE).
? It would be interesting to see whether general administration is
significant in other support functions and whether there are
opportunities to restructure administration across functions.
? 37 WTE are engaged in finance projects.
? Understanding these projects and how they relate to the Finance
Reform Programme would be helpful particularly in the context of
releasing resources to work on that programme.
? Line management accounts for 44 WTE suggesting an average
span of control of 1:34.
? We would expect a ratio of 1:15 in transaction processing and 1:9
in compliance and decision support.
Focusing on the core finance processes, the allocation of finance WTE is as
follows:
Figure 21: The Current and Future shape of Finance
Research across public sector organisations found that the average ‘shape’
is decision support 20%, compliance 35% and transactional 45%, with an
aspiration to move towards 40% decision support and 30% on both
compliance and transaction processing. Best in class is 70% focused on
decision support.
The analysis shows that disproportionate effort is being spent on transaction
processing which echoes previous reports and business cases and argues
for process redesign, transaction volume reduction and a restructured
service delivery model.
54% 16% 15% 14%
0% 20% 40% 60% 80% 100%
As Is TRANSACTIONAL
COMPLIANCE AND CONTROL
DECISION SUPPORT
NON CORE PROCESSES
63%
45%
19%
35%
18%
20%
0% 20% 40% 60% 80% 100%
As Is
Traditional
TRANSACTIONAL
COMPLIANCE AND CONTROL
DECISION SUPPORT
94
CONFIDENTIAL – between PA and The Health Service Executive
A.3 Duplication of process activities
By duplication of process activities we mean the number of locations where
a process activity (such as payroll processing) takes place. Significant
duplication increases the risk of process variation and complicates
governance and control. It is also an inefficient use of resources. Good
practice suggests that process activities should be located:
? In operational or regional finance where the process activity
requires local interaction or data capture
? In national finance where the process activity requires specialised
knowledge or expertise
? In shared service where the process requires little or no site-
specific input and is process intensive.
The following charts show the number of locations where each finance
activity takes place. Where process activities should be local, the challenge
is to ensure standardisation and reduce the volume of
transactions/complexity of work; where process activities should be
centralised, the challenge is to consolidate.
Figure 22: Compliance
Applying leading practice principles, the following table indicates where
these processes should be delivered.
Activity Operational
/ regional
finance
National
finance
Shared
services
Governance and controls –
development of internal controls and
communication of regulatory
requirements
?
Period end closure - raising of
journals and account reconciliations
? ?
Cash management – cash forecasts,
approval of creditor payments and
income cash collection
?
Financial statements – production of
periodic regulatory reports
?
Treasury / Vote: cash flow budgeting
and management, cash accounting
and Vote returns to the Department
?
Capital accounting – accounting for
fixed assets
? ?
Financial risk management and
insurance – insurance and risk
management strategy and
processing insurance claims
?
Taxation – advice and guidance and
tax returns
? ?
Systems support – upgrades and
systems maintenance
?
The analysis suggests that opportunities exist to consolidate compliance
activity and to redesign how compliance services are delivered as part of the
move to a new operating model.
Figure 23: Transaction Processing
86.00
79.00
64.00
58.00
32.00 34.00
29.00
37.00
47.00
-
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40.00
60.00
80.00
100.00
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95
CONFIDENTIAL – between PA and The Health Service Executive
Applying leading practice principles, the following table indicates where
these processes should take place.
Activity Operational
/ regional
finance
National
finance
Shared
services
Order to receipt – raising and approving
requisitions, approving and issuing orders
and receipting goods and services
?
Invoice approval to payment – matching of
supplier invoices to orders and receipts
and payment of invoices
?
Payroll changes - permanent changes (e.g.
starters, leavers, transfers) and temporary
changes (e.g. overtime, absence) – data
collection, data validation and data input
?
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claims documentation, submission of
claims to insurers and responding to
? ?
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/ regional
finance
National
finance
Shared
services
questions
RTA claims - recovery of hospital care
costs from patients who claim
compensation for RTAs
?
A&E cost recovery - recovery of €100
charge for A&E visits
?
Other income - recording of sundry income
?
Cash management and debt recovery -
matching of receipts to invoices and
recovery of overdue receipts
?
The analysis suggests that there is a requirement to standardise the front
end of processes and opportunities to reduce the number of transactions
and consolidate activities which should be centralised
78.00
99.00
68.00
60.00
28.00
25.00
129.00
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56.00
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40.00
60.00
80.00
100.00
120.00
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CONFIDENTIAL – between PA and The Health Service Executive
Figure 24: Decision Support
Applying leading practice principles, the following table indicates where
these processes should take place.
Activity Operational
/ regional
finance
National
finance
Shared
services
Financial strategy and planning - support
for medium term financial planning,
supporting the organisation to consider the
impact of new legislation and changes to
planning assumptions
?
Corporate budgeting -supporting the
Annual Estimates Process and corporate
budget setting
?
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/ regional
finance
National
finance
Shared
services
Corporate financial management and
reporting - production and development of
periodic financial reports for HSE board
and internal management, and
development and monitoring of cost
?
Programme financial management and
reporting - analysis of expenditure by care
group or national programme
?
Operational budgeting - supporting the
Annual Estimates Process at a regional or
local level and operational budget setting
?
Operational financial management and
reporting - production of monthly budget
statements, review of monthly reports with
operations
?
Cost containment planning - time spent on
the preparation and review of cost
containment plans
?
Costing - collation of diagnostic and
intervention activity into DRG for tariff
recovery, income and expenditure
statements by directorate/speciality
(through activity or patient costing)
?
Provision of financial advice - insight and
analysis which adds value to routine
financial management and reporting
? ? ?
Value for money - service reviews,
Benchmarking and consideration of new
ways of working and delivery models
?
The analysis suggests that there is an opportunity to consolidate decision
support activity (such as value for money) and to ensure consistency in
63.00
37.00
61.00
47.00
79.00
86.00
76.00
48.00
82.00
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97
CONFIDENTIAL – between PA and The Health Service Executive
decision support activity for hospitals and ISAs (e.g. service line costing
approach).
A.4 Fragmentation
By fragmentation we mean the number of finance activities undertaken with
an individual role. The argument is that where effort is spent on many
finance activities, skills are quality are diluted. The following table identifies
the average number of activities undertaken at each grade level:
Grade Average activities
AND 11
Finance Director 15
General Manager 9
Grade VIII 11
Grade VII 8
Grade VI 6
Grade V 5
Grade IV 4
Grade III 2
The analysis indicated that senior grade staff are supporting a wide range of
finance activities, which may reflect insufficient capacity in more junior
grades through non-replacement of staff and indicates opportunities to make
more use of skilled and qualified staff at lower grades.
A.5 Activity profile of core processes
We have looked at the profile of process activities within core processes.
The following bar charts identify that the process activities consuming the
most WTE effort.
Figure 25
ecision Support Decision support effort is mainly expended on monitoring and evaluation
activity – operational budgeting, operational financial management and
reporting, programme financial management and reporting, corporate
financial management and reporting, corporate budgeting and cost
containment planning (70%).
7%
3%
11%
7%
11%
27%
8%
9%
11%
5%
0% 5% 10% 15% 20% 25% 30%
Financial Strategy & Planning
Corporate Budgeting
Corporate Financial Management and Reporting
Programme Financial Management and Reporting
Operational Budgeting
Operational Financial Management and Reporting
Cost Containment Planning
Costing (Job, project, patient level)
Provision of Financial Advice
Value for Money
98
CONFIDENTIAL – between PA and The Health Service Executive
Figure 26 Compliance
Further analysis is required to determine opportunities to consolidate
compliance activity particularly in taxation, cash management, period end
closure and governance and controls. This analysis should be undertaken
by HSE finance now and the findings incorporated into the detailed design
stage.
Figure 27: Transaction Processing
The analysis shows that around 42% of activity is focused on the front end
of transaction processes, reinforcing the opportunity for standardisation and
reduction in the volume of transactions. Around 50% of activity is expended
on repetitive and predictable processing of invoices and payroll, reinforcing
the opportunity for consolidation.
A.6 Cost Analysis
Our analysis has enabled a process “cost to serve” to be produced and this
is summarised in the table below.
The survey sought to collect volume information (e.g. number of purchase
invoices and number of payslips) but insufficient data has been returned to
enable transaction costs and a meaningful benchmarking to be undertaken
at this stage. Efforts will be made to revisit this analysis should transaction
data from out-side the statutory sector in particular be made available.
This is important to inform the future design and to provide guidance on the
overall shape of finance required going forward.
Reviewing the cost to serve data highlights areas where cost savings and
efficiencies are possible, and these are explored below.
13%
33%
9%
9%
3%
6%
3%
11%
11%
0% 5% 10% 15% 20% 25% 30% 35%
Governance and controls
Period end closure
Cash management
Financial statements - HSE and schemes
Treasury/Vote
Capital accounting
Financial risk management and insurance
Taxation (PAYE, PRSI, USC, VAT)
Systems support
14%
26%
17%
21%
10%
1%
1%
4%
6%
0% 5% 10% 15% 20% 25% 30%
Order to receipt
Invoice approval to payment
Payroll changes
Payroll processing
Private health claims
RTA claims
A&E cost recovery
Other income - car parks, restaurants
Cash matching and debt recovery
99
CONFIDENTIAL – between PA and The Health Service Executive
Much of this can be done ahead of any system implementation and will
involve further automation and reduction in transaction volumes in front-end
transaction processes and the consolidation of processes in National
Finance and National Shared Services.
Table 9: Cost, WTE and number of locations by activity
100
CONFIDENTIAL – between PA and The Health Service Executive
The total cost of finance is
11
€73.9m and it is broken down as per the
following table:
Table 10: Cost by grade and process
Grade Transaction
Processing
Compliance Decision
Support
Non-Core Total
€m
Grade III 12.10 1.11 0.33 1.59 15.13
Grade IV 12.00 2.00 1.26 1.92 17.18
Grade V 5.60 2.37 1.59 1.47 11.04
Grade VI 2.66 1.93 1.58 1.66 7.83
Grade VII 1.10 2.35 2.45 1.59 7.49
Grade VIII 0.34 2.37 4.28 1.63 8.62
General
Manager
0.05 0.82 1.94 0.61 3.43
Finance
Director
0.01 0.17 0.31 0.12 0.62
AND 0.13 0.43 1.52 0.50 2.57
€m 33.99 13.56 15.27 11.08 73.90
11
As there is no grade data for 41 respondents (referred to as N/A in grade data), they are not
included in the cost number. We estimate a further cost of circa €2m but do not include this in
our analysis.
Observations:
? Of the €15.27 spent on decision support, only €3.77m is
accounted for by General Managers, Finance Directors and ANDs.
? The total cost of these three grades is €6.63m; this suggests that
€2.85m (i.e. the €6.63m less €3.77m and 43%) is spent on
processes other than decision support. Anecdotal evidence
suggests that a lot of this time is spent on validation of data.
? Of the €33.4m spend on transaction processing; €24.1m is by
grade three and four level staff.
? €11.08m is spent on none-core finance processes such as general
administration and projects.
? Of the total of €73.9m, €43.35m is accounted for by grades three,
four and five.
Figure 28: Cost versus time as a % total (excluding non-core)
54%
63%
22%
19%
24%
18%
0% 50% 100%
Cost
Time spent
TRANSACTIONAL
COMPLIANCE AND
CONTROL
DECISION SUPPORT
101
CONFIDENTIAL – between PA and The Health Service Executive
Figure 28 compares the cost of the core finance processes against the
WTE’s involved. The cost of transaction processing at 54% of the total is
less than the percentage of WTE’s involved of 63%. The following section
on grade analysis explains this as the majority of transaction processing is
carried out by grades three to six. AT 54%, the current cost transaction
processing is too high.
A.6.1 The opportunities for change
There are significant opportunities for change. The case for change at this
point responds to legacy weaknesses in financial management and
highlights areas where cost savings and efficiencies are possible. Further
arguments for change in response to the emerging health landscape are
discussed in Section 3 below. This high level case for change endorses
previous work on shared services business cases – that there is a significant
efficiency opportunity.
It is important to note that the ability to generate these savings relies on a
successful combination of up-skilling and/or redeploying staff and a
redundancy programme where necessary.
Whilst the following comments are based upon incomplete data, finalising
the shape of finance survey will only strengthen the case for change.
Transaction processing - Purchase to pay
There are 277 WTE supporting the purchase to pay process in over 99
locations and a full cost of €13.3m. The salary and salary on-cost element is
€11.4m.
The purchase to pay process ranges from highly manual to highly
automated. For statutory acute hospitals, accounts payable staff are located
in 8 regional offices; for the voluntary hospitals and PCCC accounts payable
is a devolved, local activity. There are opportunities to standardise, simplify
and further automate the order to receipt process, to reduce transaction
volumes and to consolidate accounts payable activity.
The purchase to pay strategy needs to be developed in conjunction with
procurement. We are aware that there is parallel work to restructure
procurement, stores management and the order to receipt process. To
optimise benefits, it is critical that purchase to pay is reviewed from an end-
to-end process perspective through co-ordinating finance and procurement
initiatives. Particular initiatives to investigate from a process perspective will
include:
? Strengthen strategic procurement (commodity management and
structured strategic sourcing programme) to reduce the number of
suppliers and transactions. [dashboard number of suppliers and
invoices]
? Implementation of best practice e-procurement technology to
further automate the order to receipt process, reducing paper-
based manual ordering and reducing time in the approval process.
? Increased compliance management to supplier, process and
contract.
The business case for the national finance and procurement system
identified 244 WTE currently involved in purchase to pay and the estimated
end state WTE as 136 – a saving of 108 (44%). Applying a 44% reduction to
the 277 number (122) and taking a Grade III salary plus salary on-cost of
€35,400 equates to a target annual saving of €4.3m.
The 244 WTE as per the national finance and procurement system business
case only includes statutory staff. We would expect a much larger number
as the voluntary organisations are included yet the data collection suggests
277 people. This is an example of the incomplete nature of this data
collection exercise; only 9 of the 16 S38 voluntary acute hospitals and 9 of
the S38 community providers submitted returns. Given the localised nature
of these activities, it is estimated that the total number is much higher and
therefor the potential annual savings is also higher than the €4.3m above.
The move to HSCPs is an opportunity to start to realise savings even within
the current systems environment. Formation of groups will necessitate
combining legacy hospital and PCCC finance teams.
102
CONFIDENTIAL – between PA and The Health Service Executive
Transaction processing - Payroll
There are 259 WTE supporting the payroll process in over 60 locations and
a full cost of €12.8m. The salary and salary on-cost element is €10.9m.
Payroll processing staff are currently located in 9 departments and there is a
range of processing arrangements in place. The process for payroll changes
is largely manual. There are opportunities to automate the front end of
payroll through self-service technologies and as part of operational systems
development, such as rostering. The end-to-end payroll process redesign
has to align with work in HR and operations. There is a significant, but
challenging, opportunity to reduce the number of payrolls. There are
currently 101 different payroll cycles (6 weekly, 75 two weekly, 4 four weekly
and 16 monthly) and this figure does not include all of the voluntary
organisations.. Payroll process efficiencies will arise from:
? Standard payroll data capture, processes and procedures
? Centralisation of payroll processing
? HR and payroll systems integration
? Self-serve technology
? Automation of payroll changes through self-service technologies
and operational systems
? On-going benchmarking of payroll processes and costs.
The median benchmark for payroll staff to total employees is 1:1200. On the
basis of 116,964 HSE staff, this suggests 97 staff in payroll – a saving of
162 WTE in comparison to current staffing levels. The National Payroll
Shared Services Transition business case identified a potential saving of 94
WTE from the internal implementation option. Taking a Grade III salary plus
salary on-cost of €35,400, a saving of 162 staff equates to a target annual
saving of €5.7m
Transaction processing - Income
There are 113 WTE involved in the income process in over 100 locations at
a full cost of €5.6m. RTA, A&E and other income is a local activity with
limited opportunity for efficiency savings. Private health claims processing
comprises preparing the claim which has to be local, and processing the
claim which should be centralised (and is partly through National Shared
Services). Further analysis is required to identify efficiency savings from
further consolidation. A 20% reduction in WTE numbers from further
standardisation and centralisation (including voluntary organisations) using a
Grade III salary plus salary on-cost of €35,400 generates annual savings of
€0.5m.
The time value of money should also be considered here. An automated
efficient Income process across both voluntary and statutory providers
should result in the quicker receipt of cash to the HSE.
Compliance
Overall, Compliance involves 207 WTE at a full cost of €13.6m and a salary
plus salary on-cost of €11.6m.
Efficiency opportunities will arise in period end processing from both the
implementation of HSCP groups and the move to shared services. Similarly,
the move to shared services will also reduce payroll taxation work from the
current 9 returns.
The Compliance benefits from the future operating model are principally
about control which will have an impact on pay and non-pay expenditure
rather than efficiency.
At this stage, it is difficult to calculate potential savings on a bottom up,
fundamental basis but it is not unreasonable to take the €4.2m spent on
period end process identified above and assume a saving from the
introduction of a fully automated system that would significantly reduce the
widespread manual intervention that currently takes place. This saving
should be redirected towards higher value add compliance processes as the
size of compliance is larger in the desired shape of finance.
Decision support
Overall, Decision Support involves 194 WTE at a full cost of €15.4m and a
salary plus salary on-cost of €13m.
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The move to HSCP groups will rationalise demand for operational financial
management and reporting i.e. support will be provided at a group rather
than individual hospital or LHO.
The Decision Support benefits from the future operating model are
principally around strategic planning and performance management. There
will be an impact on the quality of decision-making and challenge to the
performance of HSCPs rather than efficiency.
An observation from the data collection is that the total cost of General
Managers, Finance Directors and AND grades is €6.63m and of this €3.77m
is spent on decision support; this suggests that €2.85m (i.e. the €6.63m less
€3.77m and 43%) is spent on processes other than decision support.
Anecdotal evidence suggests that a lot of this time is spent on validation of
data prior to making decisions. It is not unreasonable to suggest that an
operating model that supports the production of timely and reliable reports
will free up this resource for greater decision support and hence a potential
benefit of circa €2m is achievable as the majority of their time should be
spent of decision support. This is before the actual benefit of better decision
making is considered on the system overall. This is a very important point.
Conclusion
The case for change at this point responds to legacy weaknesses in
financial management. Further arguments for change in response to the
emerging health landscape are not included in these estimates. This
endorses previous work on shared services business cases – that there is a
significant efficiency opportunity.
The table below summaries the potential savings and estimates that €15.8m
in annualised savings could be achieved representing 21% of the cost of
finance.
Potential Savings Identified Above Total €m
Purchase to Pay 4.3
Payroll 5.7
Income 0.5
Compliance 3.0
Decision Support 2.0
Total Potential Savings 15.5
Savings as % of total Finance Cost 21%
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A.7 Grade Analysis
The following table details the total WTE numbers by grade and process. A
number of observations are as follows:
? 54% of WTE are in transaction processing (692 out of 1273)
? Grade III and IV make up 56% of the total
? Although there is no grade data for 41 respondents as mentioned
above, these only account for 17 WTE.
Table 11: WTE numbers by grade and process
Figure 29: Analysis of grade by process
0
50
100
150
200
250
300
350
400
450
AND Finance
Director
General
Manager
Grade III Grade IV Grade V Grade VI Grade VII Grade
VIII
#N/A
TRANSACTIONAL COMPLIANCE AND CONTROL
DECISION SUPPORT NON CORE PROCESSES
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Figure 30: % of time spent on activities (by grade)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Grade III Grade IV Grade V Grade VI Grade VII Grade VIII General
Manager
Finance
Director
AND #N/A
Finance related Project Work
General Administration
Line Management
Corporate Governance
Value for Money
Provision of Financial Advice
Costing (Job, project, patient level)
Cost Containment Planning
Operational Financial Management and Reporting
Operational Budgeting
Programme Financial Management and Reporting
Corporate Financial Management and Reporting
Corporate Budgeting
Financial Strategy & Planning
Systems support
Taxation
Financial risk management and insurance
Capital accounting
Treasury/Vote
Financial statements - HSE and schemes
Cash management
Period end closure
Governance and controls
Cash matching and debt recovery
Other income - car parks, restaurants
A&E cost recovery
RTA claims
Private health claims
Payroll processing
Sum of Payroll changes
Invoice approval to payment
Order to receipt
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A.7.1 Template Returns
Region Acute hospitals - statutory Received
DML Midland Regional Hospital Mullingar ?
DML Midland Regional Hospital Portlaoise ?
DML Midland Regional Hospital Tullamore ?
DML Naas General Hospital ?
DML St Columcille's Hospital Loughlistown ?
Region Community - Statutory Received
DML LHO Area 10 Wicklow
DML LHO Area 9 Kildare / West Wicklow
DML LHO Area 11 Laois / Offaly
DML LHO Area 12 Longford / Westmeath ?
DML LHO Area 1 Dun Laoghaire
DML LHO Area 2 Dublin South East
DML LHO Area 3 Dublin South City
DML LHO Area 4 Dublin South West
DML LHO Area 5 Dublin West
Region Community - S38 voluntary Received
DML Cheeverstown House ?
DML Leopardstown Park Hospital
DML Royal Hospital Donnybrook
Region Community - S38 voluntary Received
DML Our Lady's Hospice
DML Peamount Hospital
DML Stewart's Hospital ?
DML Children's Sunshine Home ?
DML Drug Treatment Centre ?
DML Kare
DML Sisters of Charity Moore Abbey
DML Sisters of Charity Laois/Offaly
DML Sisters of Charity Delvin
DML Dublin Dental Hospital Board
DML National Rehabilitation Hospital
DML St John of God Eastern Region
DML Sunbeam House Services
Region Acute hospitals - S38 voluntary Received
DML Children's University Hospital Temple Street
DML Coombe Women's and Infants University Hospital
DML National Maternity Hospital Holles Street ?
DML Our Lady's Hospital for Sick Children Crumlin ?
DML Royal Victoria Eye and Ear
DML St James's Hospital ?
DML St Michael's Hospital Dun Laoghaire ?
DML St Vincent's University Hospital Elm Park ?
DML Tallaght Hospital ?
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Region Acute hospitals - statutory Received
South Bantry General Hospital
South Cork University Hospital ?
South Kerry General Hospital ?
South Mallow
South South Tipperary General Hospital ?
South St Luke's Hospital Kilkenny ?
South Waterford General Hospital ?
South Wexford General Hospital ?
Region Community - Statutory Received
South LHO Kerry ?
South LHO West Cork ?
South LHO Nth Cork ?
South LHO Nth Lee ?
South LHO Sth Lee ?
South LHO Sth Tipperary ?
South LHO Waterford ?
South LHO Wexford ?
South LHO Carlow / Kilkenny ?
Region Community - S38 voluntary Received
South St Mary's of the Angels Beaufort
South Lota Brothers of Charity
South Waterford Brothers of Charity
South Cope Foundation
South St John of God Tralee
South Cork Dental Hospital
South St Patrick's Kilkenny
South Carriglea Sisters of the Bon Saveur
Region Acute hospitals - S38 voluntary Received
South Mercy University Hospital Cork ?
South South Infirmary University Hospital Cork
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Region Acute hospitals - statutory
DNE Cavan-Monaghan Hospital Group: Cavan
Monaghan and Monaghan General Hospitals
?
DNE Connolly Hospital - Blanchardstown ?
DNE Louth County Hospital ?
DNE Our Lady of Lourdes Hospital Drogheda ?
DNE Our Lady's Hospital Navan
Region Community - Statutory
DNE LHO Cavan Monaghan ?
DNE LHO Louth ?
DNE LHO Meath ?
DNE ISA Dublin North City ?
DNE ISA Dublin North ?
Region Community - S38 voluntary
DNE Central Remedial Clinic
DNE Incorporated Orthopaedic Hospital (Clontarf)
DNE St Michael's House ?
DNE St Vincent's Fairview
DNE Daughters of Charity, Navan ?
DNE St John of God Drumcar
Region Acute hospitals - S38 voluntary
DNE Beaumont Hospital ?
DNE Cappagh National Orthopaedic Hospital
DNE Mater Misericordiae University Hospital
DNE Rotunda ?
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West
Region Acute hospitals – statutory
West Galway University Hospitals ?
West Letterkenny General Hospital
West Mayo General Hospital ?
West Mid-Western Hospital Dooradoyle
West Mid-Western Hospital Ennis
West Mid-Western Hospital Nenagh
West Mid-Western Regional Maternity Hospital
West Mid Western Regional Orthopeadic Hospital Croom
West Portiuncula Hospital Ballinsloe ?
West Roscommon County Hospital ?
West Sligo General Hospital ?
Region Community - Statutory
West LHO Donegal ?
West LHO Sligo / Leitrim ?
West LHO Mayo ?
West LHO Roscommon ?
West LHO Galway ?
West LHO Clare ?
West LHO Limerick ?
West LHO Nth Tipperary ?
Region Community - S38 voluntary
West Brothers of Charity Galway
West Brothers of Charity Limerick ?
West Brothers of Charity Clare
West Daughters of Charity Limerick
West Daughters of Charity St Anne's Roscrea
West Brothers of Charity Roscommon ?
West Wisdom Services Cregg House, Sligo ?
Region Acute hospitals - S38 voluntary
West St John's Hospital Limerick
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ANDOF-led finance teams & National Services
Received
Annual Financial Statements and Governance
?
Capital
?
Corporate Reporting (Finance)
?
Finance, Central
?
Finance Department, SS
?
Payroll, Shared Services
?
Value for Money
?
Regional Finance DNE
?
Regional Finance DML
?
Regional Finance South
?
Regional Finance West
?
National Cancer Screening Service
?
PCRS
?
NMPDU
?
National Ambulance Service
?
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B.1 Introduction
The Training Needs Analysis survey was developed to assess the
requirements for the training and development of future skills and
capabilities identified. The questionnaire was addressed to all staff involved
in finance activities. This on-line questionnaire was designed so that it
should have taken no more than 30 minutes to complete. It was sent to
each person identified in the Shape of Finance Template. Every person who
completed the template was requested to forward the link to each member
of their team identified with an instruction and explanation e-mail which was
also provided.
Participants were asked to assess their level of expertise against each of the
relevant skills and capabilities. It is not expected that all staff will have
expertise in all areas identified and a ‘not applicable’ option (N/A) was there
for this purpose. The results of the assessment will be used to identify key
areas for future skills/capability development and will inform the design of
training programmes to support the development of financial management
practice across the HSE.
The survey was sent out on Monday, May 20th with participants being
requested to complete it by Friday, May 31st. The initial response was
mixed and an extension was provided till Monday, June 17th.
702 people completed the survey from the 1,628 people identified in the
Shape of Finance exercise. It must be noted that a number of staff reported
difficulties in submitting the survey which was due to HSE servers going
down intermittently during this time.
The survey was split into two sections; the first was a number of questions
of a factual nature such as age group and length of experience. The second
section asked participants to rate themselves against different skills. There
were four skills headings and each had a number of questions; behavioural
skills, technical skills, interpersonal skills and decision support skills.
B.1.1 Staffing Profiles: Analysis and Observations
The following are the high level observations from the analysis of the data:
? 111 qualified accountants out of the 702 respondents (16%), 73%
of which are Grade 8 and higher. Whilst numbers of trainee
accountants are not included (or identified through the survey), this
statistic raises concerns for succession planning
? Only 8% of qualified accountants are in the age group 20-39. This
is very low and although it does not take effect of those in training,
it suggests a significant skills gap that needs to be addressed
? Responses indicated 280 team managers and team leaders
managing 420 team members, which represents a ratio of 1:1.5
B TRAINING NEEDS ANALYSIS
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and highlights a potential to examine layers of management and
spans of control as part of any detailed organisation design.
However, there will be a range of spans of control from large to
small teams and managers working without teams
? 69% of the staff supporting finance activities are aged 40 and
above, which although indicating considerable knowledge and
experience highlights a requirement for succession planning,
particularly for finance activities where deep technical or system
knowledge is required.
Grade Manager Team
Leader
Team
Member
AND 9
General Manager 29 1
VIII 54 8 5
VII 28 15 13
VII 18 33 16
V 16 32 56
IV 16 125
III 1 203
Other 15 5 4
Total 169 111 422
Table 12: Analysis of Respondents by Grade
Table 13: Analysis of Respondents by Age, Qualifications & Experience
Age Profile Manager Team
Leader
Team
Member
20-29 1 0 23
30-39 25 22 144
40-49 88 49 136
50-59 51 37 104
60-69 4 3 15
Qualifications
Qualified Accountant 85 9 17
Degree/MBA 89 29 73
Experience
Up to 3 years 11 7 37
Greater than 3 years, less than
10 years
16 11 145
Greater than 10 years, less than
15 years
29 40 114
Greater than 15 years 113 53 126
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B.1.2 Training Needs Analysis and Observations
A view has been taken as to the desired skills for a manager, a team leader
and a team member in each of the service delivery model elements:
operations excellence, financial specialists and business partnering.
The actual skills for each are taken from those who work in transaction
processing for operations excellence, in compliance for finance specialists
and in decision support for business partnering.
In summary, there is good alignment between desired and actual
behavioural skills of staff across the HSE. However the gap widens with the
other three categories; interpersonal skills, technical skills and decision
support skills.
The following diagram highlights the gaps between the desired and actual
skills of a manager in Business Partnering.
Figure 31: Business Partner – Manager
The following diagram highlights the gaps between the desired and actual
skills of a team member in Business Partnering.
Figure 32: Business Partner - Team Member
Comparing both of the above diagrams highlights the difference in the
desired skills of a manager versus a team member. It also highlights the
similarities in current skill levels of both roles whereas they should be quite
different as can be seen by comparing both blue lines (desired skill levels).
The skills gaps at both levels need immediate attention with particular
attention required to address the gaps at management level. It is critical that
there are supports in place to help and encourage a staff member at in a
team member role progress through to a team manager role over a period of
time.
It is also worth highlighting the different skills required for a manager in
operations excellence versus a manager in transaction processing. Although
difficult to see below, the decision support and technical skills are different,
therefore the support required in developing these needs to acknowledge
this.
0
1
2
3
4
5
Behavioural
Skills
Interpersonal
Skill
Technical
Skills
Decision
Support
Desired
Actual
0
1
2
3
4
5
Behavioural
Skills
Interpersonal
Skill
Technical Skills
Decision
Support
Desired
Actual
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Figure 33: Operations Excellence - Manager
Figure 34: Finance Specialist - Manager
Conclusion
The success of the future operating model will depend heavily on having the
right people in the right roles. The various different roles across decision
support, finance specialists and operation finance all require different skills.
It is critical that the design phase identifies and describes these various
roles and skills and that this information is incorporated into the HSE’s HR
strategy. This strategy should be underpinned by the following activities:
? A workforce development plan, this will identify the specific requirements
across the system;
? The provision and completion of financial training courses by both
finance and non-finance staff will create system-wide financial
management awareness. Train and support budget holders and service
managers in financial management as they will be expected to take
ownership of their budget and their performance will be assessed
accordingly;
? Enable a compulsory Continuous Professional Development (CPD)
programme supported by learning and development plans. The survey
highlighted the shortage of qualified accountants in the 20 to 39 year old
age bracket. It is important that staff are encouraged and supported to
continuously up skill and subsequently rewarded with more challenging
roles. The results of CPD programmes should provide real time skills
analysis data;
? Defined skills and capabilities for senior roles will be established; and
? Create a programme of performance management that supports desired
behaviours. This will reward positive behaviours but will also have the
support of the CFO to take action when undesirable behaviours are
discovered.
-
1
2
3
4
5
Behavioural
Skills
Interpersonal
Skills
Technical Skills
Decision
Support
Desired
Actual
-
1
2
3
4
5
Behavioural
Skills
Interpersona
l Skills
Technical
Skills
Decision
Support
Desired
Actual
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C.1 Introduction
The emergence of Hospital Groups in the coming months will provide a real
opportunity to rationalise financial management across the sector, and bring
consistency, transparency and improved effectiveness to operational
financial management practices.
There are some strong examples of good practice in financial management
within the hospital sector, and it is important that these form the basis for
future practice as the sector moves towards Trust status.
The move to groups and money follows the patient will have a significant
impact on financial management practice in the acute sector, as further
service reconfigurations will be required to ensure long term sustainability.
Financial management practice must change, to enable groups to operate
as single entities, not a collection of individual hospitals; and to support the
increased focus on service line management and patient level costing
required to enable groups to operate effectively in the new environment.
C.2 The emerging group structures
Hospital Groups generally comprise a combination of statutory and voluntary
providers. Whilst voluntary providers may continue to have external
reporting requirements, within the HSE, the distinction between statutory
and voluntary is removed as the Hospital Groups will work with HSE as a
single organisation (with several locations).
The following analysis presents the 2013 budget allocation, the number of
finance WTEs, the financial systems, the financial performance and the
maturity of financial management practice by hospital for each group.
This provides a useful snapshot of the current position and insight to inform
the direction of travel each group should take as it transitions to Trust status
over time, to ensure that financial management arrangements are
appropriate given the challenging financial context in which they are
operating.
It is clear that there is little correlation between size of budget, finance staff
in place and relative financial performance.
In general and not specific to any hospital in particular, this is down to a
number of reasons such as:
? Hospital spend is outside the control of finance – finance is seen
purely as a reporting function
? Wrong people in certain jobs – HR policy of filing a finance post at
most grades with a general administration person irrespective of
experience, knowledge or even interest perpetuates this problem
? Resource allocation – the balance of WTE across transaction
processing, compliance and decision support is significantly
skewed towards transaction processing and as such the budget
C EMERGING HOSPITAL GROUPS
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holder in the individual health and social care provider is most
likely not getting the support needed in terms of decision support.
In the case of one hospital, transaction processing takes up 79%
of finance WTE resource.
C.3 Steps towards a new operating model
The immediate priority for emerging groups will be to introduce financial
management arrangements across the entirety of the group to enable the
financial position to understood from a group perspective. It is suggested
that the financial management arrangements in place within the strongest
performing hospital within the group be used as the basis for interim
arrangements.
It will be expected that all aspects of the new finance operating model will be
implemented in the groups over time which means:
? All transaction processing to be carried out by shared services
? A single financial management system
? A standardised approach to service line management and patient
level costing to be deployed across all groups to facilitate Money
Follows The Patient.
This will provide a significant opportunity to design and develop a financial
management model for the acute sector , which builds on existing good
practice, and to deploy this approach consistently across the sector.
This will be a significant programme of change, which should be owned by
the CFO to ensure that outcomes align with the mandated financial
management framework and the resulting financial management practices
are fit for purpose.
A similar approach should be adopted when considering the outcome of the
ISA review in due course.
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C.4 Dublin East
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C.5 South / South West
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C.6 Dublin North East
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C.7 Dublin Midlands
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C.8 West / North West
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C.9 Mid West
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D.1 Business partnering
The following are a selection of case studies from organisations that have
implemented finance business partners.
Case study – Boeing
Boeing established a strategic vision for Finance and Accounting to become
a true partner with the business by shifting focus to value-adding activities.
Boeing’s senior management recognised that the company’s financial
processes and related systems did not support the strategic objectives.
They therefore:
? Identified the strategic capabilities of Finance
? Focused on the supporting processes to those capabilities to identify opportunities
for streamlining, simplification or standardisation, and set priorities
? Compared Boeing practices and capabilities with best practices in accounting
transaction processing, close and consolidation, reporting and analytics, planning
and budgeting, and systems architecture
? Identified and prioritised improvement opportunities and developed a business
case to move forward
? Guided the development and implementation of ‘to be’ processes and systems to
ensure a quality solution in a timely manner.
Based on the pain points and alignment to strategic capabilities, Boeing
identified six work streams that simplified and standardised, and created
headroom for more effective partnering with the business:
? Rationalised chart of accounts – reduced from more than 15,000 to less
than 1,000
? Moved to a single level consolidation – rationalised five sub-consolidation
systems
? Standardised and monitored compliance and close procedures –
reduced close from 12 to five days
? Implemented common tools for data capture – 75 per cent reduction in
the use of spread sheets for statutory data gathering
? Standardised on one general ledger across the enterprise – more than
30 discrete general ledgers were consolidated to one.
D CASE STUDIES
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Case study – BBC
The BBC adapted to rapid forecast changes in audience behaviours,
programme initiatives and new technologies by creating a new enterprise
model. Finance decided it needed to develop a more agile structure to
support this and as a starting point redefined its mission:
“Building a better business, proactively driving value
for our audiences through informed and insightful
decision making, and fostering a culture of continuous
improvement across the BBC. A business and
Finance team, which works in partnership with the
divisions and maintains a transparent system of
effective standards, processes and controls.”
Characteristics of BBC Finance’s vision:
? Finance is a strategic business partner, agile and responsive to business
needs
? Processes are streamlined and easy to use
? Finance supports the BBC across all its key measurement needs,
providing relevant understandable information
? The Finance organisation comprises a team of skilled professionals
? Finance supports diligence and rigour with internal controls
? A single technology system underpins Finance
? Finance consumes no more than one per cent of revenue
Case study – a multinational pharmaceutical group
After a merger, the new organisation embarked on a programme to drive out
the synergies in research and development (R&D), sales, marketing and
back-office support services. It therefore:
? Outsourced its IT support (PCs, servers and software support) to IBM
? Reduced the number of enterprise resource planning (ERP) applications
? Consolidated and integrated the businesses in the US.
This left a complex organisation in Europe with a matrix of business units for
sales and marketing, discovery, development and manufacturing in each
country. The Finance function has responded by:
? Creating three transaction processing shared service centres in Europe
? Embedding Finance specialists in the business units
? Rolling out Hyperion planning
The next stage is to leverage a component business modelling analysis of
the existing organisation, and to roll out a PeopleSoft HR platform to
construct a framework for global support and enabling services, including
Finance.
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Case study – IBM
The IBM financial systems blueprint was redesigned based on commonality
across an integrated matrix management system. This involved:
? Creating common data definitions, corporate data standards for financial
elements and a worldwide chart of accounts
? On that foundation, building common applications for accounting
transactions such as employee disbursements, inter-company billings,
accounts payable, accounts receivable and assets
? Feeding source data into a common ledger system to allow aggregation
by unit at the corporate level.
On a base of common, worldwide accounting data, IBM could then deploy a
robust financial information strategy and common worldwide planning
system to deliver business and treasury management information. Systems
were run in common geographic mega centres and data maintained in a
worldwide financial information warehouse. IBM invested in collaborative
solutions: instant messaging, online team rooms and Web conferences.
Using programmes such as IBM ThinkPlace*, which is designed to capture
ideas from across the company, IBM gained more input on which to build
through active collaboration with colleagues. The foundation for this culture
of collaboration is the On Demand Workplace, which allows the
communication of information to be tailored to the requirements of specific
roles.
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D.2 Shared services
In 2012 the UK Government announced plans for significant changes in their
corporate shared services. The Next Generation Shared Services Strategic
Plan outlines how government departments and arms-length bodies will
share functions to deliver potential savings of between £400 and £600m a
year in administration costs. These cost savings will come from harnessing
the benefits of shared services, including standardized processes, fewer
errors, increased automation, leveraged technology, and more efficient use
of resources.
As head of the Civil Service, Sir Bob Kerslake, said
“By bringing together more of the services that
departments use, we can not only save the taxpayer
millions, an important goal in its own right, but we can
deliver on our commitment to become a more unified
body providing a first class service to the public.”
Full details of the structure will be revealed later this year, however there will
be a maximum of ?ve Shared Service Centres (SSCs). Two SSCs will be
independent of any single customer, and three SSCs will be standalone in
terms of operations but will be subject to performance monitoring. There will
also be a Crown Oversight Function responsible for governance. The two
independent SSCs will be provided through the divestment of the
Department for Transport (DfT) SSC to an outsourced provider and the
second will be built on the Department for Work and Pensions (DWP) SSC.
The functions that will move into share services include: human resources,
payroll, record to report order to cash, and accounts payable. Only certain
‘core functions’ will be moved into the shared service centres, and for
‘optional’ services, departments can compare costs with their in-house
services and decide whether they will retain the service or move it to shared
service centre.
Also announced in the report were details on the creation of a Crown
Oversight Function that works with departments to deliver improvements in
the quality of service and reduction in the operating costs of shared services
towards upper quartile performance. The Crown Oversight Function will
monitor performance of all ?ve SSCs and departmental retained functions.
D.3 Big Data
D.3.1 Why better use of information will improve
outcomes for patients throughout the NHS
NHS England was introduced towards the end of 2012 and is already
playing a vital role in on-going efforts to improve outcomes for patients. One
of its main responsibilities is to monitor the performance of commissioners
and providers, collating key indicators from thousands of organisations and
using them to define clear standards and increase accountability.
Working with data on this scale, however, has proven to be highly
problematic in the past. As a result, anomalies that should automatically
require urgent management attention – such as high mortality rates and
anomalous trends in care provision - were not acted upon in time. To
support its duties effectively, the Board needs a single version of the truth
that draws from vast data sets in NHS and visualises performance indicators
in a consistent and easy-to-use presentation.
A new intelligence tool developed by NHS England in partnership with PA
Consulting Group, QlikTech and Google Enterprise is a making this ambition
a reality. The first phase in the intelligence tool’s development brings
together over 100 indicators from 10 different national sources, covering
NHS England and including A&E performance and mortality rates. This
provides a single version of the truth that allows commissioners to effectively
manage the quality of care. Commissioners can use the clear and concise
user interface to explore potential issues by comparing performance across
providers and interactively exploring the data in near real-time for that
specific organisation.
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The power of the software that this tool uses has already been
demonstrated in a previous experiment by PA, which used the same Google
big query tools to analyse anonymised NHS Hospital Episode Statistics
data. Running sophisticated queries on this data, which consists of 1 billion
rows of data, would previously have taken days, if not weeks. With the new
technology, however, the data could be worked with almost instantly. Asking
the entire HES database about hospital admissions after heart attacks took
about 20 seconds when ordinarily it would have taken much longer. The
potential impact of this new tool for NHS England is therefore considerable.
As well as enabling NHS England to work effectively with massive
quantities of data, another significant outcome of the new technology is that
it will allow a greater number of people to analyse and make sense of
healthcare information available. As part of its transparency agenda, the
Government has committed itself to making performance figures available to
data scientists and to the wider public. As a development, this is in line with
trends beyond healthcare. Ofsted, for example, make school reports
available – why should it not be the same for healthcare information? This
would enable patients to review the performance of health services and
individual doctors. The only requirement is the ability to know how to work
with data, to ask the right questions and to (in the words of Google) ‘have a
conversation with the data.’
The creation of this new technology is a clear indication that we are at a
hugely exciting time in the development and transformation of both the NHS
and healthcare generally. If the industrial revolution was driven by steam,
the healthcare revolution will be driven by data.
D.3.2 Potential of Big Data
The amount of data in our world has been exploding, and analysing large
data sets—so-called big data—will become a key basis of competition,
underpinning new waves of productivity growth, innovation, and consumer
surplus, according to research by MGI and McKinsey's Business
Technology Office. Leaders in every sector will have to grapple with the
implications of big data, not just a few data-oriented managers. The
increasing volume and detail of information captured by enterprises, the rise
of multimedia, social media, and the Internet of Things will fuel exponential
growth in data for the foreseeable future.
D.3.3 Deep analytical talent: Where are they now?
Research by MGI and McKinsey's Business Technology Office examines
the state of digital data and documents the significant value that can
potentially be unlocked.
MGI studied big data in five domains—healthcare in the United States, the
public sector in Europe, retail in the United States, and manufacturing and
personal-location data globally. Big data can generate value in each. For
example, a retailer using big data to the full could increase its operating
margin by more than 60 per cent. Harnessing big data in the public sector
has enormous potential, too. If US healthcare were to use big data creatively
and effectively to drive efficiency and quality, the sector could create more
than $300 billion in value every year. Two-thirds of that would be in the form
of reducing US healthcare expenditure by about 8 per cent. In the developed
economies of Europe, government administrators could save more than
€100 billion ($149 billion) in operational efficiency improvements alone by
using big data, not including using big data to reduce fraud and errors and
boost the collection of tax revenues. Users of services enabled by personal-
location data could capture $600 billion in consumer surplus. The research
offers seven key insights.
1. Data use has swept into every industry and business function and are
now an important factor of production, alongside labour and capital. We
estimate that, by 2009, nearly all sectors in the US economy had at
least an average of 200 terabytes of stored data (twice the size of US
retailer Wal-Mart's data warehouse in 1999) per company with more
than 1,000 employees.
2. There are five broad ways in which using big data can create value.
First, big data can unlock significant value by making information
transparent and usable at much higher frequency. Second, as
organizations create and store more transactional data in digital form,
they can collect more accurate and detailed performance information
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on everything from product inventories to sick days, and therefore
expose variability and boost performance. Leading companies are
using data collection and analysis to conduct controlled experiments to
make better management decisions; others are using data for basic
low-frequency forecasting to high-frequency nowcasting to adjust their
business levers just in time. Third, big data allows ever-narrower
segmentation of customers and therefore much more precisely tailored
products or services. Fourth, sophisticated analytics can substantially
improve decision-making. Finally, big data can be used to improve the
development of the next generation of products and services. For
instance, manufacturers are using data obtained from sensors
embedded in products to create innovative after-sales service offerings
such as proactive maintenance (preventive measures that take place
before a failure occurs or is even noticed).
3. The use of big data will become a key basis of competition and growth
for individual firms. From the standpoint of competitiveness and the
potential capture of value, all companies need to take big data
seriously. In most industries, established competitors and new entrants
alike will leverage data-driven strategies to innovate, compete, and
capture value from deep and up-to-real-time information. Indeed, we
found early examples of such use of data in every sector we examined.
4. The use of big data will underpin new waves of productivity growth and
consumer surplus. For example, we estimate that a retailer using big
data to the full has the potential to increase its operating margin by
more than 60 percent. Big data offers considerable benefits to
consumers as well as to companies and organizations. For instance,
services enabled by personal-location data can allow consumers to
capture $600 billion in economic surplus.
5. While the use of big data will matter across sectors, some sectors are
set for greater gains. We compared the historical productivity of sectors
in the United States with the potential of these sectors to capture value
from big data (using an index that combines several quantitative
metrics), and found that the opportunities and challenges vary from
sector to sector. The computer and electronic products and information
sectors, as well as finance and insurance, and government are poised
to gain substantially from the use of big data.
6. There will be a shortage of talent necessary for organizations to take
advantage of big data. By 2018, the United States alone could face a
shortage of 140,000 to 190,000 people with deep analytical skills as
well as 1.5 million managers and analysts with the know-how to use the
analysis of big data to make effective decisions.
7. Several issues will have to be addressed to capture the full potential of
big data. Policies related to privacy, security, intellectual property, and
even liability will need to be addressed in a big data world.
Organizations need not only to put the right talent and technology in
place but also structure workflows and incentives to optimize the use of
big data. Access to data is critical—companies will increasingly need to
integrate information from multiple data sources, often from third
parties, and the incentives have to be in place to enable this,
intellectual property, and even liability will need to be addressed in a big
data world. Organizations need not only to put the right talent and
technology in place but also structure workflows and incentives to
optimize the use of big data. Access to data is critical—companies will
increasingly need to integrate information from multiple data sources,
often from third parties, and the incentives have to be in place to enable
this.
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E.1 Introduction
Workshops were held to consider options for compliance, transaction
processing and decision support. These workshops were attended by the
Working Group and process specialists.
At each workshop:
? Options were described
? Evaluation criteria proposed
? Scoring mechanism proposed
Workshop attendees then debated the options against the evaluation criteria
and scoring mechanism to reach a recommended solution
E.2 Compliance
The Compliance option appraisal considered the degree to which operating
model attributes should be mandated across the system.
The degrees of prescription considered were:
? Mandatory: where all HSCPS are required to comply with
? Recommended: where all HSCPS are encouraged to comply with
standards defined by CFO
? Guidance: where all HSCPS are to consider standards defined by
CFO
The appraisal considered the following operating model attributes
Operating model attribute
Process (the way in which the service is undertaken)
Governance and controls (internal and external regulations)
Information (data governance)
Technology (supporting systems)
Skills of the finance professionals in the System
Culture and behaviours (compliance and sanctions)
A group discussion captured the advantages and disadvantages arising
from mandating aspects of the operating model, then each option was
scored to determine the preferred option.
E.2.1 Recommendation and scoring
The overwhelming recommendation was for a mandatory financial
management framework.
E OPTIONS APPRAISAL
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Finance Operating Model
Options Appraisal: Compliance
Average score from all Groups
Option A B C D E F Total
Process (the way in which the service is undertaken)
As Is 0.67 0.33 0.00 0.33 0.00 0.67 2.00
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 5.00 4.33 29.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.33 2.33 2.00 2.33 2.00 2.33 13.33
Guidance: all HSCPS are to consider standards defined by CFO 0.67 0.67 0.67 0.67 0.67 0.67 4.00
Governance and controls (internal and external regulations)
As Is 1.33 1.33 1.33 1.00 1.00 1.33 7.33
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 4.33 3.67 28.00
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 1.00 1.00 1.00 1.00 1.00 1.67 6.67
Guidance: all HSCPS are to consider standards defined by CFO 0.33 0.33 0.33 0.33 0.67 0.67 2.67
Information (data governance)
As Is 0.67 0.33 0.33 0.33 0.00 0.67 2.33
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 5.00 4.33 29.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 1.33 1.33 1.33 1.33 1.33 1.33 8.00
Guidance: all HSCPS are to consider standards defined by CFO 0.33 0.33 0.33 0.33 0.33 0.33 2.00
Technology (supporting systems)
As Is 1.33 1.33 1.00 1.00 1.00 1.67 7.33
Mandatory: all HSCPS are required to comply with standards defined by CFO 5.00 5.00 5.00 5.00 5.00 4.33 29.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.00 2.00 2.67 2.00 2.00 2.00 12.67
Guidance: all HSCPS are to consider standards defined by CFO 0.67 0.67 2.00 0.67 0.67 0.67 5.33
Skills of the finance professionals in the System
As Is 0.67 0.67 0.67 0.67 0.67 0.67 4.00
Mandatory: all HSCPS are required to comply with standards defined by CFO 3.67 4.33 4.33 4.33 4.33 3.00 24.00
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.33 3.00 2.33 2.33 2.33 3.00 15.33
Guidance: all HSCPS are to consider standards defined by CFO 0.67 0.67 1.00 0.67 0.67 1.00 4.67
Culture and behaviour
As Is 0.33 0.33 0.33 0.33 0.33 0.33 2.00
Mandatory: all HSCPS are required to comply with standards defined by CFO 3.00 3.67 3.67 3.67 3.00 2.33 19.33
Recommended: all HSCPS are encouraged to comply with standards defined by CFO 2.33 3.00 2.33 2.33 1.67 2.33 14.00
Guidance: all HSCPS are to consider standards defined by CFO 1.00 0.67 1.00 0.67 0.67 1.00 5.00
Deliverability:
Capability,
Capacity,
Affordability &
Risk
Alignment
with Design
Principles
Meets
requirements
of Future
Health
Improves
Quality of
Management
Information
Changes
Behaviours
Releases
resources for
value adding
services
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E.2.2 . Group Observations
Culture and behaviours:
Advantages Disadvantages
As Is
Maintains ‘hard working’ culture Staff burn out, fatigue and
disillusionment
Top down Financial risk
No reward for good performance
Lack of management / resource
allocation
Passive resistance to change
Little or no accountability
Decisions based on ‘county jersey’ or
‘it’s my money’
Sense of entitlement
Running to stand still
Mandatory
Delivers significant change, compliance
and uniformity
Creates resistance and fear
People feel more involved in the process Impact on staff morale
Less IR difficulties Reduced flexibility
Promotes staff development
Creates time for value added activity
Clarity and equity
Trust the system to support them
Recommended
Supports ‘consensus’ approach Less impact than mandatory option
Advantages Disadvantages
Less IR challenge Discretionary implementation
Reward system is performance linked Burdensome consultation process –
resource drain
Guidance
People feel more part of the change Little or no change
Wasted effort
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Technology and supporting systems
Advantages Disadvantages
As Is
Existing skill set High cost of maintenance
No capital outlay Too much data validation
Allows intermediate migration without
procurement process
Compliance issues
Doesn’t support changing
structures
Different systems producing
inconsistent data
Mandatory
Consistency of best practice Implementation costs (but builds on
current investment)
Data integrity Staff resistance
Leads to better use of staff resources Lack of suitable in house resources
Standard hierarchies Loss of autonomy at a local level
Aids staff progression
Better compliance and control
Frees up resources from transaction
processing to value added services
Recommended
Empowerment of local management Higher risk of maintaining the as is
environment
No line of sight
Promotes resistance
Only partial improvement of
compliance issues
Advantages Disadvantages
Guidance
May improve the as is situation Weakest option
Little or no improvement
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Skills and capabilities
Advantages Disadvantages
As Is
Assumption / expectations for qualifications Local discretion
Keeps existing staff – great experience Greater risk of financial errors
Local discretion Additional training costs
Risk arising from capability of staff General recruitment for junior grades
– square pegs in round holes
Lack of structured finance for non-
financial managers programme
Lack of structured HSE-wide CPD
programmes
Lack of career progression for
experienced staff without
qualifications
Staff can leave at any time
No succession planning
Mandatory
Good balance of resources –
experience/role/background/skills
Loss of experienced staff
Clear standards for skills requirement No career progression for staff not
qualified
Succession plan Training costs and resources
Clear standards of what elements are
mandatory (key) and recommended (other)
Demarcation issues
Clear and consistent application of financial
regulations and reporting
Loss of morale for staff who can’t
progress because not qualified
Recommended
Local discretion Inconsistent level of skills and
Advantages Disadvantages
qualification
Incentive for staff Lack of consistency in training across
accountants
Better morale
Career path
Encouragement of staff
Guidance
More clarity than as is No consistency at all
Total local discretion – users happy Even greater risks
Structure to career progression
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Governance and controls
Advantages Disadvantages
As Is
Manpower in maintaining as is Diverse cultures
High level awareness of
governance framework
Levels of compliance with governance framework
Maintain current governance
framework
Level of buy-in to governance framework
Meets statutory obligations Political acceptability
Single legal entity No line of sight
Awareness of our fit / gap Unnecessarily time consuming to meet statutory
and other financial deadlines
User perception re impact on their roles
Mandatory
Adds accountability and
ownership
Cost and effort
Enables enforcement Needs very clear process to communicate rules
and processes
Eliminates/minimises
appropriate political influence
Huge training requirements
Clarity
Unambiguousness
Consistency in consequences
Recommended
Softer approach May be appropriate for some things but not for
main fundamental issue
Systems / users may accept
much quicker
Encourages inconsistency
Advantages Disadvantages
More acceptable in a mature,
stable environment
No reliance on financial data
Monitoring more complex
Difficult to ensure implementation of
standardisation
A la carte
Lack of consistency in consequences
More difficult to implement and police
Lack of clarity
Guidance
Users may be very happy with it Throw out existing learning
No consequences
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Information (data governance)
Advantages Disadvantages
As Is
Reflects local ways of working, systems Inconsistent data structures
No line if sight
Promotes inefficiency
Huge inconsistencies
Lack of standardisation
Too much data validation
Huge resources to maintain as sis
Mandatory
Consistency for consolidation Local flexibility in more detailed cost
centres
Single chart of accounts Ability to get agreement
Master data owned and consistent Benefits across multiple systems
Top level cost centre structure to support
aggregation at the element level
Value added reporting due to greater
consistency
Single chart of account element level
consolidation through MI
Fewer codes and feeder systems
Recommended
Only for local requirements, that are not
aggregated
Undermines objective of consistent,
comparable, reliable data
Definitions difficult to enforce
Guidance
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Process
Advantages Disadvantages
As Is
Process reflects local needs, skills,
capabilities and technology
Creates differentiation, complexity in
line of sight and consolidation
Extreme inefficiencies
Waste of resources
Mandatory
More efficient use of resources Could be inflexible – emergency
procedures would be required
Single communication lines Decision support processes need
flexibility – reflecting experience and
management styles
Gives staff feeling of security / assurance Requires people to be trained in
context of organisational changes
Process documented
Guidance manuals
Ensures data that is reliable, consistent
Achieves single line of sight
Creates robust control framework
Internal and external regulations demand
compliance
Transaction processing and compliance
processes should be mandatory for control
and efficiency
Recommended
Allows flexibility in decision support
processes
Would be interpreted as ‘choice’ and
work around developed
Transition (if current systems cannot Inconsistency of approach
support mandatory processes)
Guidance
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E.3 Transaction processing
The Transaction processing option appraisal considered three specific
business challenges and sought the best operating model option to achieve
the desired outcomes, namely:
? How will Finance influence the end to end transaction processes to
ensure that they are simplified standard and consistently followed?
? What is the best way to ensure effective information management
and data governance across the system?
? Our goal is a single financial system. What is the most efficient
and cost effective way of getting there?
The appraisal compared the current position, or As Is against a number of
alternative operating model options.
Operating model options
Operations excellence within finance (i.e. the future requirements from transaction
processing will be delivered through shared services)
Operations excellence outside finance (i.e. the future requirements from
transaction processing will be delivered through National Shared Services)
Delivered within the Business (i.e. the future requirements from transaction
processing will be delivered locally by HSCPs, including through self service)
Outsource Transaction Processing (i.e. the future processing requirements from
transaction processing will be delivered through an external partner).
Outsource Financial Systems (i.e. the future financial systems requirements will be
delivered through an external partner).
A group discussion captured the advantages and disadvantages arising
from mandating aspects of the operating model, then each option was
scored to determine the preferred option
Evaluation criteria applied were:
? Alignment with design principles
? Meets requirements of Future Health
? Improves quality of management information
? Changes behaviours
? Releases resources for value-added services
? Deliverability: capability, capacity, affordability and risk.
E.3.1 Recommendations and scoring
The appraisal concluded the following:
? Technology should be outsourced (managed service)
? Information (data governance) should be owned and managed by
finance
? Process should be delivered by National Shared Services
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Finance Operating Model
Options Appraisal: Transaction processing
Average for all Groups
Option A B C D E F Total
Process
As Is 0.67 0.00 0.33 0.33 0.33 0.67 2.33
Operations Excellence within Finance 1.67 1.67 2.33 2.33 2.00 3.00 13.00
Operations Excellence within NSS 5.00 5.00 4.33 4.33 4.33 3.00 26.00
Business / Self-Service
Outsource: Process 4.33 5.00 3.67 4.33 5.00 1.00 26.00
Information (data governance)
As Is 0.33 0.00 0.33 0.67 1.33 1.33 4.00
Operations Excellence within Finance 5.00 5.00 5.00 4.33 3.67 3.67 26.67
Operations Excellence within NSS 3.67 3.67 3.67 2.33 3.67 2.33 19.33
Business / Self-Service
Outsource: Process
Technology (systems)
As Is 1.33 1.33 1.33 1.00 0.33 0.33 5.67
Operations Excellence within Finance
Operations Excellence within NSS 3.67 4.33 3.67 1.67 3.00 2.33 18.67
Outsource: Systems 3.67 3.67 3.67 2.33 3.67 2.67 19.67
Alignment
with Design
Principles
Meets
requirements
of Future
Health
Improves
Quality of
Management
Information
Changes
Behaviours
Releases
resources for
value adding
services
Deliverability:
Capability,
Capacity,
Affordability &
Risk Total Score
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E.3.2 Group Observations
Technology
Advantages Disadvantages
As Is
Unique to HSE Efficiencies not maximised
New common system delivered Higher support costs
Less risk Processes not changed – inefficiencies
continue
Improved processes and
information
Local fixes
Better security More expensive to maintain
Staff morale improved Shared services strategy not supported
Online / self-service No upgrades since 1999 – customised
Facilitates standard ways of
working
Unlikely to deliver objectives e.g. common
chart of accounts
Duplication
Multiple support
National shared services
Addresses weaknesses in as is Staff expertise and resources – affordability
Improved governance Cost and effort to maintain and implement
upgrades
Single owner Investment in back up procedures
Control over development Not a core function
In house capability and knowledge
Security
Outsource
Reduced costs Data protection risks
Advantages Disadvantages
Maintained versions Reliance
Access to expertise Premium cost
Risk transferred Cost of change – transparency
Effective use of expertise Is there a provider big enough?
Access to new technology /
innovation
Contract management
Greater flexibility IR issues?
Sign off / approval may be easier Loss of control
Free up resources – systems
administration
Response times to problems
Pace for implementation
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Information (data governance)
Examples of data are:
Chart of accounts: GL: care group,
cost centre, subjective, project
Commodity codes –
national codes
Vendor master -
procurement and AP
Customer master - income Employee master:
HR and payroll
AFS/IMR/monthly
reporting
COMPSTAT – not finance DRG/patient level
costing – not finance
Fair deal reports /
occupancy
Payroll pay groups / pay scales
Advantages Disadvantages
As Is
Producing reports, meeting deadlines, paying
suppliers – works but creaking
Can’t change in line with future
Too many systems
Line of sight
Complex touch points – not
automated and takes too long
Changes take significant effort
Too much manual intervention
Lack of comparability
Operations excellence in Finance
More aligned with finance Need for engagement
Governance easier to mandate Ability for NSS to deliver if not
Advantages Disadvantages
involving them in the change
Efficiencies / standardised process
Less duplication
Operations excellence in NSS
Co-ownership of data and process Time delay on decision making if
not part of finance
Different organisations – will be a
challenge
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Process
Advantages Disadvantages
As Is
Known Labour intensive
No up-front investment required or risk from
change
No line of sight
No disruption Lacks consistency
Resource inefficiency
Won’t cope with new structures
Duplication
Not sustainable
Resource intensive
Not sustainable
Dependency on local knowledge
Expensive
Operations Excellence - Finance
Speed – decision making, access to staff, local
knowledge, more control and flexibility
Risk of regional ad hoc regional
development
Lack of standardisation
Duplication / cost
Less local control
Lack of national view –
consistency and comparability
HR / procurement interface –
lack of integration
Operations excellence in NSS
Standardisation Risk in bigger project
Advantages Disadvantages
Consistency / comparability IR issues
Line of sight Up- front investment
Resource savings / cost benefit over time Loss of local knowledge
Opportunity to scale up Time to implement
Lower delivery risk Availability of resources
Control and compliance Investment in training
Easier to audit
More control over front end
Staff development / career path
Expertise
Quality of service
Business / self-service
Part of has to be in the business but needs
automation and control
Loss of control
Implementation risk
Operational risk
Technology access
Outsourcing
Speed of start up Loss of knowledge and control
Economies of scale Risk of cost escalation due to
lock in
Release people IR issues
Security of service provision Data security
Should be cheaper Need to make staff redundant /
TUPE to achieve savings
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Advantages Disadvantages
Leading edge technology Loss of expertise in provider –
staff turnover
Sustainability and capacity Not current good practice
Not core business
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E.4 Business Partners
During the option appraisal workshop participants considered the three
business partner roles proposed to deliver Decision Support in the new
operating model, exploring advantages and disadvantages, and
appropriateness for the Irish health system.
Commissioning Business Partners
? Commissioning Business Partners work alongside the National
Directors. Responsibilities include:
– reform and delivery of services in their specified service domain;
– the development of national service strategies; and strategic
commissioning frameworks for their areas of responsibility.
The Commissioning Business Partner is the face of finance for the National
Directors and will be part of the National Director team. The role is forward
looking, engaging business intelligence, finance specialists and operations
to develop scenario plans and business cases. In doing so, the Business
Partner is acting as the representative of the CFO.
Commissioning business partners are proposed on the assumptions that
commissioning is led by National Directors; there will be an SLA between
finance and the National Directors; trusted financial and activity data is
available; finance business partners have a care group focus but report to
the CFO; and finance business partners are appropriately trained and
resourced. On this basis, the advantages and disadvantages of this
business partner role are:
Advantages Disadvantages
Finance has a meaningful value added
role
May have conflicts to manage between
finance and service priorities
On balance, the recommendation is that commissioning business partners
are appointed to mirror the National Director roles.
Performance Business Partners
? Performance Business Partners work with the COO and RDPIs in
supporting the planning and performance management process. The
Performance Business Partner is part of a multi-disciplinary Planning &
Performance team.
? The Performance Business Partner receives a regional view of care
group data from Operations Excellence and holds reviews with the
HSCPs in their region.
? The Performance Business Partner provides monitoring and evaluation
support for their area overall and for each care group, acting as a
representative of the CFO;
Performance business partners are proposed since they will enhance
regional service planning. The Working Group argued that these business
partners need to be appointed quickly to make an impact; that their
effectiveness will be influenced by the quality of information and systems in
place; and that their role has to be more than number crunchers. On this
basis, the advantages and disadvantages of this business partner role are:
Advantages Disadvantages
Consistency of performance
management
There will be variation in effectiveness
during transition to the new finance
operating model
Standardisation of reports to facilitate a
national view
Will take time for a broader perspective
to be embedded
Shifts focus to the service – finance only
one aspect
Improves trust – not just a finance hat
on
On balance, the recommendation is that Performance business partners
are appointed to mirror the RDPI roles.
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Operational Business Partners
? Operational Business Partners provide decision support activities within
HSCPs, and are responsible for ensuring appropriate financial
management practices are in place to support effective financial control
and sound decision making at a local level.
Operational business partners are proposed with the following assumptions:
there are strategic local decisions but these are made in the context of
national care group strategy; in the context of a changing environment,
finance needs to take control of the agenda and shape how finance services
will be provided; support can adapt to multiple reporting relationships and be
supported by multi-dimensional reporting. On this basis, the advantages and
disadvantages of this business partner role are:
Advantages Disadvantages
Deep knowledge of local operations
through integration with operational staff
Going ‘native’ – driven by local agenda
Dedicated resources aligned to
operations structure
Meeting corporate objectives depends
upon operations working effectively with
finance business partners. Changing
role of Group CFO and move to MFTP
should help
HSCP CEO has access to a local
business partner
On balance, the recommendation is that operational financial support
business partners are appointed to mirror the HSCP CEO (or equivalent)
and HSCP functional director (or equivalent) roles.
They will be the Finance Director of each HSCP and will have professional
accountability to the CFO.
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We recommend a service delivery model that comprises business partners,
finance specialists and operations excellence.
The academic basis for this delivery model is the HR model developed by
Dave Ulrich of Ross School of Business at the University of Michigan. Ulrich
introduced the concepts of three business components: business partners,
centres of expertise and shared services.
The way in which HR is structured to deliver its services has been the
subject of considerable debate and discussion over recent years. What
emerges from the literature are two approaches to HR organisation:
? traditional approaches of a single team of generalists, specialists
and administration, or a corporate strategy team aligned by
business units or locations
? the ‘three-legged stool’ Ulrich model of business partners, centres
of expertise and shared services.
Research has found that a traditional structure of HR services is still
common in many organisations and is particularly prevalent in small and
medium sized organisations. This is due to the fact that because of
resource constraints, HR teams in SMEs have to be versatile and deal with
both the strategic and the operational work.
Over recent years it has been Ulrich’s model of human resource services
delivery which has become regarded as best practice. The most common
interpretation of the model is based on three means or mechanisms of
service delivery: HR business partners, HR centres of expertise and shared
HR services. In the 2006 Chartered Institute of Personnel Development
survey, 83% of organisations reported that they had introduced Ulrich’s
business partner model in some way (these organisations would mainly be
large scale).
Although initially developed for HR services, the principles of the Ulrich
model apply equally well to other support services such as finance.
Accountancy bodies and international consultancies have endorsed the
Ulrich model as best practice and it is widely adopted in large scale public
and private organisations.
F ORGANISATION DESIGN
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The shared services leg of the model has developed over the period since
the Ulrich model was first put forward. Leading practice now is for an
integrated shared services model that goes beyond transaction processing
into added value accounting and knowledge-based services. The latter has
been facilitated by new developments in business intelligence systems. In
PA, we refer to this broader role as operations excellence.
Having established the core attributes of the operating model, the next step
is to determine the services to be supported in each area by considering the
characteristics of each service.
Finance Service
Business Partner Finance
Specialist
Operations
Excellence
Decision support
Programme
financial
management and
reporting
?
Operational
budgeting
?
Operational
financial
management and
reporting
?
Cost containment
planning
?
Costing
?
Provision of
financial advice
?
Financial strategy
and planning
?
Corporate
budgeting
?
Corporate financial
management and
reporting
?
Business Partners
Finance
Specialists
Operations
Excellence
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Finance Service
Business Partner Finance
Specialist
Operations
Excellence
Value for money
?
Compliance
Governance and
controls
?
Financial
statements
?
Treasury / Vote
?
Capital accounting
?
Financial risk
management and
insurance
?
Taxation
?
Period end closure
?
Cash management
?
Systems support
?
Transaction
processing
Order to receive
?
Invoice approval to
payment
?
Finance Service
Business Partner Finance
Specialist
Operations
Excellence
Payroll changes
?
Payroll processing
?
Private health
claims
?
RTA claims
?
A&E cost recovery
?
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Business intelligence is a key enabler for the role of the business partner.
Typically, business intelligence involves the following ‘layers’:
? Information users – finance’s key stakeholders
? Management – business intelligence strategy to ensure that
business needs are being met; data governance to ensure
consistency of data definitions and data ownership; architecture
and software to advise on the most appropriate technology
solutions
? Business intelligence competency centre(s) – data warehouse and
analytical capability
? Operational systems – the source data for the data warehouse.
The term business intelligence is often used to describe the technical
architecture of systems that extract, assemble, store and access data to
provide reports and analysis. It can also be used to describe the reporting
and analysis applications or performance management tools. But business
intelligence is not just about hardware and software. It is also about
organisation wide recognition that an organisation’s data is an important
strategic asset that can yield valuable management information that can be
used to support decision making.
Leading businesses are investing in business intelligence (BI) solutions to
secure improved performance management. There is a commonly held
belief that investing in an improved BI solution, to deliver a ‘single version of
the truth’, will enable better decision making and improve performance
management. To be successful, investment in BI has to be well co-
ordinated, strategic and avoid ‘single issue’ deployments that lead to an
array of local solutions. Establishing a business intelligence competency
centre enables a common approach which yields better value for money.
The common solution must address the needs of specific business
communities to avoid these groups finding solutions of their own and avoid
replicating similar functions within these groups.
To establish a BICC that is seen as a ‘must have’ capability, it has to have
business analytical functions at its heart. This will help the service to look
beyond data integration and technology and to focus on delivering critical
business insights. The BICC provides the information used to support
Operational systems
Business Intelligence Competency Centre(s)
• Data warehouse
• Analytical capability
Business Intelligence
Strategy
Data governance
Architecture and
software
Information users – National Directors, RDPIs, H&SCPs
G BUSINESS INTELLIGENCE
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decision making across the business. BICC resources will be
knowledgeable about the business. This service will support the
management team by providing not only the vital performance measures
they need, but also new and challenging views of the business and
operations; views that stimulate debate and fresh thinking at the senior
management table.
Developing a BI function is an evolutionary process in which all aspects of
the capability need to develop in balance:
? The BI capability will bring together key stakeholder requirements
(demand) and available data sources (supply) through a balanced
mix of people, processes and technology
Both information needs and data sources are undergoing significant change.
To satisfy the changing information needs and understand the potential of
the new data sources, the BI capability needs to evolve with these changes
Explore
possibilities
Focus on
Needs
Technology
Process
People
Information needs
(what information is required by key
stakeholders))
People
(organisation, skills and culture)
Process
(operating, discovery, change, quality control)
Technology
(technical architecture, tools for data
management, processing and quality, reports
and analysis, workflow)
Data
(line of business systems, other sources:
internal/external, structured/unstructured,
master data) S
u
p
p
l
y
D
e
m
a
n
d
How clear is the HSE about the questions
that need answering, now and in the
future? What are the priorities?
Is the value of data engrained at all levels,
do people trust and understand the data,
do they have the skills to work the tools?
Do the processes effectively allow to
maintain and improve the value delivered
from the data assets?
Can the tools support the current and
future requirements and skills for use,
discovery and maintenance?
Is there a single version of the truth, what’s
data quality like, are all relevant sources
available, how easily are new sources
discovered and added?
B
I
C
a
p
a
b
i
l
i
t
y
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The primary challenge with the current collection of systems is that they pre-
date 2005 and the establishment of the HSE. CRS or Corporate Reporting
Solution was implemented in 2006 in response to an urgent need to give
one ‘health view’ and to better enable the organisation to monitor and
respond to a changing system. Given the size of the new organisation it was
thought best to quickly develop a bespoke consolidation tool to provide a
system wide view from a common platform using existing systems
architectures as a base. It was never envisaged as a long term solution but
in spite of this has been expanded and mimicked in many forms as new
reporting pressure points have emerged over the years.
In the absence of a single financial system there has never been an impetus
to expand Corporate or local financial systems beyond the one view, a
financial and hierarchical view of the organisation. Although HR and
Procurement systems exist in many forms there has never been a single
view of these functions. Local systems are fragmented and differ in quality,
size and scope depending on where they sit geographically. The majority of
these systems date back to the Area Health Boards and although new
systems have been developed and old systems modernised there has been
no real commonality of approach to the financial systems that are used on
the ground.
In addition voluntary providers are incorporated into the HSE’s reporting at a
very high level. We are heavily dependent on provider trust because of a
lack of line of sight into each provider’s ledger. This is further complicated
with each having separate legal status and distinct governance structures.
Each of these organisations has developed their own systems in the
absence of an integrated approach.
The primary weakness in financial systems is their inability to provide
multiple views of the same data. The organisation is now finding itself
increasingly compelled to report using a matrix style view including areas
such as care groups / programmes, hospital groups, redefined ISA’s and
other emerging but as yet unspecified organisational changes. The HSE is
also in the unique position of having a dual reporting arrangement with
Government, reporting on a UK GAAP basis in addition to adhering to Vote
accounting rules and regulations. Systems were developed for Vote
Accounting to provide a high level view but that aside existing financial
systems cannot provide a detailed dual view of the organisations finances.
Whilst it is acknowledged that existing Corporate systems can be
reconfigured to support most of the above at a high level it is questionable
whether all local systems which are primarily functionally driven i.e. by
hospital / LHO and also report on strictly drawn geographical / old Area
Health Board boundaries will be able to respond to this fundamental change
in how to manage our business. Corporate systems are heavily dependent
on the systems that feed them and although with development they can
present data in a matrix form what they lack is the necessary integration with
local finance, HR and Procurement systems which would be deemed a
necessity in a rapidly changing organisation
H SENIOR FINANCE TEAM VIEW OF
CURRENT INFORMATION SYSTEMS
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A substantial number of HSE staff were involved in shaping the recommendations contained in this report. We appreciate their contribution.
Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Anne Kennedy
? ?
Ann-Marie McGill
?
Barry White
?
Bernie Hyland
?
Brian Donovan
?
Colum Maddox
? ?
Cormac Maloney
?
Damian Casey
? ?
David Slevin
?
Declan Lyons
?
I KEY STAKEHOLDERS CONSULTED
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Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Donal Foran
?
Eddie Hogan
?
Ger O’Mahony
?
Geraldine Smith
?
Gerry Greville
?
Helen Kilbane
?
Hilary Murphy
?
Ian Murray
?
Jane Carolan
?
Jennifer
O'Callaghan
?
Jim Hussey
?
Jim O’Sullivan
?
Joe Sheeky
?
John Canny
?
John Leech
? ?
John Swords
?
Kevin Finnan
?
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Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Leonard Clinton
?
Liam Minihan
?
Liam Woods
?
Lonan Durand
?
Margaret Tobin
?
Mark Fagan
? ?
Mary Guinan
?
Maureen Cronin
?
Maurice Power
?
Michael Flynn
?
Michael Lane
?
Michael Morrow
?
Michael O'Keefe
?
Michelle Brennan
?
Noelle Dineen
?
Orla Dooley
?
Paddy McDonald
? ?
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Stakeholder
Steering Group Working Group Process specialist Other stakeholders Invited to
participate
Raymonde
O'Sullivan
?
Roger Hynes
?
Sean McNamara
?
Sean Redmond
?
Sharon Hickey
?
Simon Moores
?
Simon Murtagh
?
Stephen Mulvany
?
Tadhg Costello
?
Tom Byrne
?
Triona Downey
?
Valerie Plant
? ?
Vourneen O'Connor
?
Yvonne O'Neill
? ?
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