NHS Scotland assets and facilities 2017: annual report

3.0 The Annual Cost of Assets and Facilities Services

The revenue and lifecycle costs associated with asset ownership and use represent a considerable proportion of NHSScotland budgets. This section of the report provides a summary of the annual cost (based on 2015/16 Cost Book data) of asset ownership and facilities management services. Whilst this section provides some comparative information on annual changes, more detailed information on performance trends was described earlier in Section 2.4.

3.1 Property Assets and Facilities Services - Annual Costs

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

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

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

• Catering
• Portering
• Laundry and linen
• Waste disposal

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

	Annual Property Asset and Facilities Services Expenditure (£)
	2013/14	2014/15	2015/16	Percentage Change 14/15 - 15/16
Property Maintenance (capital and revenue costs)	119.1	115.4	116.6	1%
Cleaning	122.1	126.5	131.7	4%
PPP Facilities Management Costs	115.9	118.6	121.9	3%
Catering	85.6	87.2	84.1	-4%
Energy	105.3	100.6	98.0	-3%
Rent	19.9	21.0	8.2	-61%
Rates	43.8	48.8	54.3	11%
Portering	50.3	52.3	53.9	3%
Laundry only	32.2	24.4	22.6	-7%
Waste Disposal	11.8	11.8	11.8	0%
Total	706.1	706.6	703.2	0%
Annual Increase	-0.4%	0.1%	-0.5%

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

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

The largest cost contributors are property maintenance, cleaning, PPP FM costs, catering and energy, which account for 78% of these costs. Rent is a combination of charges to the NHS and also income generated, and the reduction in this cost reflects Boards reporting an increase in rental income this year.

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

	2014/15	2015/2016	Percentage Change
Number of hospitals	216	202	-6.5%
Building Area used for measuring cleaning costs (million sq.m)	2.89	3.07	6.1%
Consumer weeks (millions) (in-patient activity)	1.00	0.98	-2.5%
Annual Property Asset and Facilities Services Costs (£millions)	706.6	703.2	-0.48%

The reduction in number of recorded hospital sites is due to a combination of consolidation of services onto single sites, disposal of redundant properties following completion of new facilities in previous years (e.g. site rationalisation following completion of the Queen Elizabeth University Hospital in Glasgow), and some minor re-classification of certain properties. However, the overall used floor area has increased in the same period which is a further indicator of the rationalisation of smaller, redundant properties as services move to larger, modernised estate.

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

3.2 Vehicles – Annual Costs

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

Annual Expenditure on Vehicle Assets
Description	£m	% of Total	No. of Vehicles	Average per Vehicle
Insurance & accident costs (net cost)	£5.9m	12.8%	9,579	£613
Fuel costs	£10.8m	23.7%	9,579	£1,132
Maintenance & servicing costs -	£5.4m	11.7%	1,882	£2,853
owned vehicles
Leased vehicle costs	£5.9m	13.0%	2,303	£2,577
(including maintenance)
Hired vehicle costs	£1.3m	2.8%	240	£5,374
Staff car scheme lease costs	£16.5m	36.0%	5,154	£3,198
(including maintenance & mileage claims)
Staff contribution towards private use	-£9.3m	-	5,154	-£1,796
Total Net Costs 2017	£36.54m	100%	9,579	£3,815
Total Net Cost 2016	£42.26			£4,321

Note: excludes depreciation on owned fleet.

In addition to the above, many NHSScotland staff use their private vehicles for official business and claim fuel and running costs of circa £23.5m through expenses claims.

The total expenditure on vehicle assets has reduced this year by over 13%, which is mainly due to reduced maintenance costs on owned vehicles for National Services Scotland and the Scottish Ambulance Service, plus a reduction in lease costs associated with the staff car scheme.

The Transport & Fleet Management Unit will continue to look at ways in which improvements can be made to the efficiency and effectiveness of this fleet aimed at reducing these operational costs further.

3.3 Medical Equipment – Annual Costs

The use of medical equipment requires operational (revenue) costs for associated consumables and accessories, for routine scheduled maintenance, and for breakdown maintenance. The survey explored these operational costs that, together with the acquisition and installation costs, form the total cost of ownership (COO) of the equipment. Consumable and accessory costs are typically charged to individual departments and no central records will cover all these costs. In most cases maintenance costs (scheduled and unscheduled) are easier to identify. Maintenance is provided through a combination of in-house staff and external service suppliers, the latter often through service contracts. Efforts are being made through robust negotiations to fix maintenance costs, in some cases for up to 10 years, to reduce the total cost of ownership of medical devices. A number of Boards have also indicated that they are developing strategies to improve the management of medical equipment and in some cases this includes increase of “in house” maintenance provision from Board’s own medical physics and clinical engineering staff. The annual maintenance expenditures reported by Boards is shown in the table that follows.

Description	2016 Expenditure (£m)	2017 Expenditure (£m)	% change
Externally sourced maintenance expenditure:	24.58	21.18	-14%
Imaging maintenance	13.44	12.26	-9%
Radiotherapy maintenance	1.15	1.08	-6%
In-house management / maintenance of medical equipment	17.70	16.04	-9%
Annual payments & lease costs for managed equipment services (excluding Laboratory managed services)	3.79	3.12	-17%
All other revenue based expenditure on medical equipment	7.97	7.82	-2%
Total Annual Expenditure On Medical Equipment:	68.63	61.52	-15%

Costs exclude VAT

The cost of ownership associated with the medical equipment assets has reduced by 10% this year. The reduction in managed equipment services is likely to be due to expiry of lease contracts and then Boards re-considering the value of this type of arrangement due to recent changes in accounting standards.

3.4 Summary of Total Annual Asset and Facilities Costs

The chart below provides an analysis of the combined total asset and facilities annual expenditure that has been described earlier. The combined expenditure of £1,014 million is a small decrease on the expenditure reported in the 2016 SAFR.

Notes:
1) Excludes depreciation costs associated with asset ownership.
2) Excludes any annual expenditure on lifecycle replacement and capital expenditure on backlog maintenance.
3) Property & Facilities Service Expenditure is for the Hospital Estate only.

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

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