As part of its role to look at challenges facing hospices, the Hospice UK Advisory Council has identified financial sustainability as one of the most pressing issues facing boards and senior teams.
It is recognised that issues will vary from service to service but the Advisory Council asked Hospice UK to consider a tool that might help boards and senior teams identify where they might be at risk. This tool should then prompt thought and consideration around how to mitigate or plan for these.
By analysing information from hospices’ audited statutory financial statements, we have developed a comparative index. This identifies which hospices might be most vulnerable to financial pressures.
The overall aim of developing the tool was to provide broad information to hospice finance directors, chief executives and trustees about how they stand in comparison to their peers. It also aims to provide a trigger for a conversation within hospices about the sustainability of their finances and what they should be doing about it.
Hospice Financial Sustainability Index
There are four equal components used to calculate the index:
1. Level of reserves compared to ongoing running costs, where reserves
include the value of any tangible fixed assets.
2. Level of reserves compared to ongoing running costs, where reserves
exclude the value of any tangible fixed assets.
3. Accumulated surpluses of deficits over the previous three financial years.
4. Size of the hospice as measured by the level of expenditure.
Notes on the index
The model is based only on historical information, and there are other ways in which we could have calculated the index which may have given slightly different results.
It should also be noted that the index is comparative rather than absolute – i.e. it just compares hospices to each other and not to any external definition of what a strong or weak organisation would look like.
The index gives hospices a score out of 100. So for example, if one hospice had the highest reserve by each measure, had made the most average surpluses over the past three years and was also the largest hospice, then it would score 100.