Statement of IntenthealthAlliance FPSC contributes to supporting the Northern Region DHBs’...

Statement of IntenthealthAlliance (FPSC) Limited2019-2023(Incorporating the Statement of Performance for 2019-2020)

Contents Message from the CEO ..................................................................................................................... 2 Our Business ..................................................................................................................................... 3

Our Environment ............................................................................................................................ 5

Our Strategic Priorities ....................................................................................................................... 7 Our External Focus Areas ............................................................................................................ 12

Drive Organisational Excellence................................................................................................... 15

Our Organisation ............................................................................................................................. 16 Our Responsibilities ..................................................................................................................... 16

Our Governance and Accountability ............................................................................................. 17

Our People ................................................................................................................................... 18

Our Stakeholder Engagement ...................................................................................................... 21

Our Statement of Performance ........................................................................................................ 23 Our Financial Forecast ................................................................................................................... 25

Statement of Responsibility .......................................................................................................... 25

Forecast Financial Statements ..................................................................................................... 25

Statement of Significant Accounting Policies ................................................................................... 30 General Accounting Policies ........................................................................................................ 30

Basis of Preparation ..................................................................................................................... 30

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healthAlliance (FPSC) Statement of Intent 2019-2024

Introduction This Statement of Intent (SOI) has been prepared by healthAlliance (FPSC) Limited (healthAlliance FPSC) in accordance with Part 4 of the Crown Entities Act 2004.

This document sets out the organisation’s strategic direction for the next five years, taking into account the priorities of Central Government (including the New Zealand Health Strategy) and Northern Region District Health Board (DHB) priorities. These, along with legislative compliance and public sector accountability, have been considered and reflected in this Statement of Intent. The Statement of Performance expectations have been included in this document.

healthAlliance FPSC is responsible for the Prospective Financial Statements and Statement of Performance contained in this document, including the appropriateness of the assumptions underlying them.

Signed on behalf of healthAlliance (FPSC) Limited:

Paul Harper Rosalie Percival

Board Chair Director

healthAlliance (FPSC) Limited Board healthAlliance (FPSC) Limited Board

Date Date

31 July 2019 31 July 2019

healthAlliance (FPSC) Statement of Intent 2019-2023Page 1


Message from the CEO

Clare Thompson CEO healthAlliance FPSC

Reflecting on the past few years, it is clear that one thing is inevitable – change. Our region is constantly growing and evolving and, as an organisation, I am proud to say that we have met this change with enthusiasm and drive.

The Northern Region is home to more than one third of New Zealand’s population, and is expected to grow by 30% in the next 20 years. Our region is rich in diversity and demographics; however, we are also reflective of wide socio-economic inequality. This puts immense pressure on our health services that can only be expected to increase.

As a shared service organisation, our value lies in how we apply our expertise to alleviate some of these pressures, so our 29 hospitals and 27,500 hospital staff can focus on what they do best – providing uncompromised healthcare.

In January of 2019, financial services joined the healthAlliance FPSC business to expand our shared service offering to include accounts payable, accounts receivable, financial control and eligibility services to the region.

In May of 2019, we established a set of strategic priorities, endorsed by the healthAlliance FPSC Board, that outline how we will transform our organisation to contribute to the success of the region. These priorities will remain our focus until 2024.

Our Purpose

Our purpose aligns our organisation with the health sector outcome that all New Zealanders live well, stay well, in a system that is people-powered. To me, this means that as an organisation we keep the patient at the centre of everything we do. Allowing our region to deliver uncompromised patient outcomes must be at the very forefront of our minds, driving our day-to-day activities.

Our Value

We deliver value to health through the right service at the right time with no fuss.

The emphasis on delivering our services with no fuss is crucial. Our services must run seamlessly in the background to ensure clinical staff can focus on the patient.

How we do it

+ We deliver the right mix of services in the right way + We will build on our shared service approach + We grow effective strategic relationships + We drive organisational excellence

Our success relies on our ability to work collaboratively as a region to deliver a framework of processes, systems and services that allow for a standardised and regionalised approach, while meeting our DHB partners’ individual needs.


Businessour


Our Business The Northern Region is New Zealand’s largest and fastest growing region with a population of 1.9 million that is demographically, geographically and ethnically diverse.

healthAlliance FPSC supports the Northern Region District Health Boards (DHBs) to achieve their individual and regional outcomes by providing an end-to-end finance, procurement and supply chain shared service.

Year to date in FY18/19 we have managed $129m spend, delivered $17.6m in procurement benefits, and delivered in excess of 1.5m order lines to 1,900 locations.

We work alongside our customers, collaborating to ensure that statutory obligations are met and that informed decisions are made to support the region.



FINANCE [FPSC] Finance is responsible for managing the large volume financial processing functions for the Northern Region. We are working with our DHB partners to ensure a seamless and consistent financial control environment. Our finance scope includes:

+ Accounts Payable: Managing the process of paying our suppliers. Working with the purchasing teams, DHBs and staff to help ensure that Purchase Orders are raised prior to goods and services being purchased. Managing a range of queries in relation to supplier payments.

+ Accounts Receivable: Managing the invoicing for services by the DHBs. Collection of money from customers including other DHBs, patients who are not eligible for free health care and other companies. Managing a range of queries in relation to receivables.

+ Financial Control: Managing the accounting processes and systems for the DHBs. This includes areas such as fixed assets, cash flow, payroll accounting and general accounting. Managing year-end audit processes and year-end financial statements.

+ Eligibility: Managing the assessment of patients to determine those who are ineligible to receive free health care. Liaising with patients and clinical staff on eligibility questions. Working with Accounts Receivable on the billing for ineligible patients.

PROCUREMENT [FPSC] healthAlliance FPSC provides procurement support for consumables, capital items, services and IT to its Northern Region DHB shareholders and healthAlliance N.Z. Limited, to enable DHBs to deliver clinical and business outcomes. Our procurement scope includes:

+ Setting the spending strategy for each category within our sphere of service, including annual procurement planning.

+ Planning the procurement initiative (i.e. Requests for Proposal) and developing supporting documentation.

+ Managing the sourcing process from release to market, to recommendation and award. + Secondary procurement activity. + Undertaking analysis of outputs from a procurement initiative (such as panel arrangements from the

Ministry of Business Innovation and Employment (MBIE) and PHARMAC) to identify the best approach for the DHBs.

+ The strategic management of the supplier or contract to ensure the contract terms are being met; + Implementation of existing healthAlliance FPSC, PHARMAC, New Zealand Health Partnerships

Limited and MBIE contracts by DHBs to realise benefit. + Providing visibility of annual procurement planning across all procurement agencies; and + Provide consolidated reporting of all benefit across all national procurement agencies for the Northern

Region. + Working with the Northern Region DHBs to create and implement a sustainable procurement

framework to enable the reporting of broader outcomes to support wider social, economic and environmental outcomes that go beyond the immediate purchase of goods and services.

SUPPLY CHAIN [FPSC] Supply Chain is responsible for purchasing, receipting and delivery of goods to 1,900 locations across the four Northern Region DHBs. Our teams ensure that items ranging from bandages to skin grafts and bone for surgery, are available when and where required.

We are working with our DHB partners to transform the supply chain operation to deliver a fully integrated, efficient and effective supply chain distribution model that will meet the future needs of the health sector in the Northern Region.

The Strategy, Planning and Intelligence team promotes effective and efficient use of the Northern Region’s information to provide our customers and shareholders with robust and actionable business information.

The team supports our strategic and operational planning, working in collaboration with our health sector customers, and provides board secretariat, internal audit and risk support to ensure that we meet our governance and compliance requirements.



Our Catalogue & Master Data team manages all data related to products, locations and vendors to ensure that products are in the correct location, correct quantity and are from the appropriate supplier. The team work proactively with businesses and vendors to deliver the benefits of master data management such as:

+ Improved control – ensuring that DHBs can control the products they want to purchase. + Faster ordering and replenishment – electronic communication with vendors makes ordering, receiving

and paying for product automatic, fast and efficient. + Lower cost – understanding total purchasing allows procurement to negotiate on behalf of the DHBs

for the best possible prices based on volume.

Our Environment OUR REGION healthAlliance FPSC contributes to supporting the Northern Region DHBs’ strategic focus on primary, secondary and community healthcare outcomes.

The Northern Region is New Zealand’s largest and fastest growing region (total population of 1.9m, expected to grow by 30% in the next 20 years). The region is rich in diversity and demographics, but also highly represented in socio-economic inequality.

Health services in the Northern Region are delivered in a range of settings from hospitals to primary and community services. Together healthAlliance NZ and healthAlliance FPSC provide services that enable DHBs to support:

+ 1.9m people (over 1/3 of New Zealand’s population) + 27,500 DHB staff + 29 hospitals, including:

Four major hospitals Nine community based hospitals Three facilities dedicated to elective surgery Thirteen Specialist mental health services

+ Nine hospital emergency departments + 91 operating theatres across the region + 3,600 hospital beds

The Northern Region DHBs also provide a range of national and regional services to patients which include a range of specialist, tertiary and rehabilitation services. The region also accesses services provided by primary and community medical care services (circa 1400 General practitioners, across 385 medical practices; as well as a large number of Primary Health Organisations (PHOs) and community based organisations).



OUR CUSTOMERS healthAlliance FPSC’s customers are primarily the four Northern Region DHBs and organisations within the health sector. During the term of this Statement of Intent, it is healthAlliance FPSC’s intent to continue to evolve and implement, in collaboration with DHBs, the end to end finance, procurement and supply chain service that supports the region’s models of care.

The focus for the next five years will be on delivering the right service at the right time with no fuss across a range of services. This will be achieved through a focus on developing regional frameworks, processes and systems that are predictable and reduce unwarranted variations.

Information and intelligence is integral in understanding our customers, gathered through various mediums such as customer satisfaction surveys and improvement plans, and the collaborative evolution of service performance metrics. healthAlliance FPSC will be accountable for the measurement and reporting of customer outcomes, development of our customer strategies, and proposals for the evolution of services to meet the needs of our customers.

Strengthening engagement with DHB Executives and Management is paramount, as is the evolution of transparent customer related reporting.

In addition, the gathering and assessment of customer demands for healthAlliance FPSC services will be integral for our services to be scaled correctly, and for end user satisfaction to be maintained. Across the five years healthAlliance FPSC is seeking to build scalable models to enable an expansion of service delivery for the Northern Region DHBs.



Our Strategic Priorities healthAlliance FPSC’s strategic priorities have been decided and have been endorsed by the healthAlliance FPSC Board. These will remain the focus up to the year 2024. Our Strategic Priorities describe how we will transform ourselves and contribute to the success of the Northern Region.



DELIVERING ON GOVERNMENT AND SECTOR EXPECTATIONS The Minister of Health’s Letter of Expectations and the revised New Zealand Health Strategy provides the District Health Boards, and their subsidiaries, with clear direction on sector priorities. healthAlliance FPSC’s role is to support the DHBs to deliver on these expectations.

Government Health System Vision Pae-Ora – Healthy Futures

Health Sector Outcomes

All New Zealanders live well, stay well, in a system that is people-powered, provides services closer to home, is designed for value and high performance, and works as one team in a smart system.

+ We live longer in good health + We have improved quality of life + We have health equity for Māori and other groups

Health Sector Priorities

+ Improving child wellbeing + Improving mental wellbeing + Improving wellbeing through prevention + Better population health outcomes supported by a strong and equitable

public health and disability system + Better population health outcomes supported by primary health care

Northern Region Shared Service Provider

healthAlliance FPSC support the Northern Region DHBs by operating efficient and effective shared services that support delivery of health sector priorities whilst assisting the region to live within its means.

Our Purpose We deliver value to health through the right service at the right time with no fuss.

What we are aiming for (Impacts on Northern Region)

+ Delivering cost effective services for the Northern Region DHBs through economies of scale and better value for money.

+ Facilitating Northern Region commercial aggregation of procurement to optimise benefits for the Northern Region across all national procurement agencies.

+ Releasing clinical time to care, and delivering operational efficiencies through shared service process improvements.

healthAlliance FPSC (Outputs)

Regional Shared Services Enabling the Northern Region DHBs through the provision of efficient and effective shared services.

Regional Procurement Aggregator Leveraging the combined volumes of Northern Region DHBs for best quality, service, technology and price in consumables, capital items, and services; ensuring operational efficiencies in the procurement of goods and services.

Regional Supply Chain Leveraging systems and processes to provide efficiencies in the supply chain and managing inventory, to provide on-time availability with reduced held stock.

healthAlliance FPSC Strategic Priorities

+ Deliver the right mix of services in the right way + Build on our shared service approach + Grow effective strategic relationships + Drive organisational excellence



OUR STRATEGIC IMPACTS In developing its impact statements healthAlliance FPSC has taken into account the long term investment plans of the region, Northern Region DHB strategies, the evolving Northern Region Priorities and their impact on service delivery. healthAlliance FPSC intends to deliver impacts in the following areas:

+ Delivering cost effective services for the Northern Region DHBs through economies of scale and better value for money.

+ Facilitating Northern Region commercial aggregation of procurement to optimise benefits for the Northern Region across all national procurement agencies.

+ Releasing clinical time to care, and delivering operational efficiencies through shared service process improvements.

For this Statement of Intent healthAlliance (FPSC) Limited will be measuring impacts in the following areas:

Impact Area Measure (FY 19/20)

Measure (Medium term)

Measure (Long term)

Delivering cost effective services for the Northern Region DHBs through economies of scale and better value for money.

Delivery of shared services within agreed funding envelope.

Delivery of shared services within agreed funding envelope.

Delivery of shared services within agreed balanced scorecard.

Facilitating Northern Region commercial aggregation of procurement to optimise benefits for the Northern Region across all national procurement agencies.

8:1 return or better on procurement funding cost.

9:1 return or better on procurement funding cost.

10:1 return or better on procurement funding cost within agreed balanced scorecard.

Releasing clinical time to care, and delivering operational efficiencies through shared service process improvements.

Maintain Availability of Oracle Inventory Managed Surgical Devices and Consumables = average 98% or better.

Maintain Availability of Oracle Inventory Managed Surgical Devices and Consumables = average 98% or better. Establish optimal level for percentage of inventory managed via Oracle Managed Inventory (OMI). Establish measures for process efficiency.

Maintain Availability of Oracle Inventory Managed Surgical Devices and Consumables = average 98% or better within an agreed cost to serve model. Maintain inventory managed on Oracle Managed Inventory at optimal level. Increase the level of process efficiency..



OUR OUTPUTS healthAlliance FPSC enable the Northern Region DHBs to deliver high quality clinical services. healthAlliance FPSC has three significant classes of outputs:

+ Regional Shared Services Enabling the Northern Region DHBs through the provision of efficient and effective shared services.

+ Regional Procurement Aggregator Leveraging the combined volumes of Northern Region DHBs for best quality, service, technology and price in consumables, capital items, and services; ensuring operational efficiencies in the procurement of goods and services.

+ Regional Supply Chain Leveraging systems and processes to provide efficiencies in the supply chain and managing inventory, to provide on-time availability with reduced held stock.

LINKING INPUTS AND ENABLERS TO CUSTOMER REQUIREMENTS The following diagram explains the linkages between enablers/inputs, output classes and output measures.

Definitions and measures to achieve success in these output areas are defined in healthAlliance FPSC’s Statement of Performance on page 23.

Note: Shared Service Delivery Output Class is the operation of Finance Services, Procurement Services and Supply Chain Services.


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OUR FIVE YEAR ROADMAP healthAlliance FPSC’s five-year roadmap.



Our External Focus Areas healthAlliance FPSC’s maturity pathway sets out how we will transform towards world-class in the next five years. These shifts build on our foundations since establishment and support us to drive improved performance within our service delivery to the Northern Region DHBs. We are at the ‘Growing’ stage and will follow this pathway to develop our capability.

DELIVER THE RIGHT MIX OF SERVICES IN THE RIGHT WAY

Why this matters

The Northern Region DHBs and patients depend on us to ensure that products and services are available when required with no fuss. We ensure

+ When a nurse or doctor needs a product it is within easy reach. + A patient’s surgery is never cancelled because the hospital didn’t have the

right product available when it was needed. + End-to-end processing of orders through to payment is smooth for DHBs

and suppliers. + Supply Chain disruption of products and services are managed to limit or

remove any impact on a hospital service or a patient. + Patient services such as eligibility assessment and invoicing are managed

in an efficient way that keeps the patient informed. + Strong management of suppliers to deliver procurement benefits to the

DHBs. + Careful management of product onboarding processes to ensure they meet

clinical demands and patient safety. + There is robust data and insights to inform our decision making. + Smooth running of shared services functions and processes to limit the

demands on DHB staff time.

What success will look like

Years 1-2 [Growing] Years 2-4 [Enhancing] Years 5+ [Optimised]

Deliver Financial Excellence – focus on being commercial business partners, delivering savings to DHBs and strong SLA metrics performance.

Grow our Services [Procurement, Supply Chain, Other] – greater levels of sourcing, supplier relationship management and inventory under management. New services aligned to strategic direction.

Establish one source of the Truth which is Accessible to all Users – improve the quality of data and analysis and create a BI environment that allows easy sharing of data.

Automate – minimise manual effort and redeploy to value add activities.

Wise use of technology – leverage planned technology developments to move towards integration of systems and tools [FPIM / Procurement Systems].

Alignment with Models of Care – ability to flex the scale of service delivery to meet operational and clinical needs.

Integrated Service Delivery –improved service delivery through greater integration of systems and tools.



BUILD OUR SHARED SERVICE APPROACH

Why this matters

Delivering high quality and low cost shared services within a complex health system requires a focused and comprehensive set of processes, frameworks and methodologies. We ensure

+ That to help shape what we do we are well informed about Northern Region DHB and patient needs.

+ Seamless service delivery between us and our partners by ensuring there are well understood processes and systems.

+ We design and deliver systems which are adaptable within the diversity of the Northern Region DHBs while still ensuring focus on end-to-end process flows which are predictable and reduce unwarranted variations.

+ Our operating approach provides a more responsive and agile way to adapt our service delivery to future challenges, including evolving health care systems, changing patient needs and emerging areas of focus.

+ Our leaders, staff and stakeholders have a common understanding and appreciation of how and why we make decisions on the mix of services we deliver.



Freedom in a Framework [Standardise] – through identifying best practice and unifying our DHBs’ requirements.

Align Business Models – focus on reduced duplication, improved processes and ensuring benefits are realised through rolling out Supply Chain Operating Model and adapting the Procurement Operating model for the changing national landscape.

New Models of Business – lead in the development of new models of business. Link to developments from the Health and Disability sector review and Regional Information Systems Strategic Plan. New services delivered within agreed models.

Repeatable and Adaptable Service Models – providing centres of excellence across a range of health shared services.



GROW EFFECTIVE STRATEGIC RELATIONSHIPS

Why this matters

Strong partnerships with strategic stakeholders are vital to our success in delivering shared services to the Northern Region DHBs. We ensure

+ The needs and interests of Northern Region DHBs and patients sit at the heart of how we partner with all stakeholders.

+ Northern Region DHBs, suppliers, government agencies and other organisations see us as an honest broker that is able to facilitate enduring partnerships.

+ A joined-up approach is taken to the end-to-end processing of orders through to payment across all parties involved in a transaction.

+ Our relationship with government agencies will strengthen our work to take an end-to-end view of shared service support arrangements.

+ Developing partnerships will help solve common system, process and capability problems.

+ Our people are seen as Subject Matter Experts who bring their knowledge and expertise.



Develop a Culture of Customer Service and Knowledge Sharing – to deliver superior customer service, to continuously grow and to be energised by innovation.

Leveraging Relationships and Knowledge - to be seen as the Subject Matter Experts.

Trusted Partner for DHBs - work in partnership with NRDHBs to co-design future services.



Drive Organisational Excellence healthAlliance FPSC’s maturity pathway sets out how we will transform towards world-class in the next five years. These shifts build on our foundations since establishment and support us to drive improved performance within our service delivery to the Northern Region DHBs. We are at the ‘Growing’ stage and will follow this pathway to develop our capability.

DRIVE ORGANISATIONAL EXCELLENCE

Why this matters

Our people are critical to our success in becoming recognised experts in health shared service delivery. We ensure

+ We are a good employer, with healthy and safe working environments for our people that are inclusive, flexible and supportive.

+ We work as one connected organisation that is part of the Northern Region health care system.

+ We have a holistic approach to leadership that provides a strong organisational culture to ensure our people feel engaged, connected and valued.

+ Our leaders harness the unique skills and expertise of our people. + The right people are in the right place at the right time to translate our

strategy into action and support Northern Region DHB priorities. + We have the needed flexibility to align our people capability to the

opportunities and challenges that are present as the Northern Region health care environment evolves.



Develop Our People and Our Leadership Capability – Develop a high performance culture within a competency framework. Develop a holistic approach to leadership.

Establish Company Identity – to ensure we have the structure we need to deliver our strategy.

Engaged and Capable Workforce – Attracting and retaining the optimal mix of talent to support our strategy and operating model.

Recognised as industry experts - in health shared service delivery.



Our Organisation Our Responsibilities STATUS AS AN ENTITY healthAlliance N.Z. Limited is a Crown entity multi-parent subsidiary in terms of the Crown Entities Act 2004, with each of the four Northern Region DHBs having a 25% shareholding.

healthAlliance (FPSC) Limited is a wholly owned subsidiary of healthAlliance N.Z. Limited, incorporated in September 2013. healthAlliance FPSC provides finance, procurement and supply chain services to the Northern Region DHBs (and other associated parties).

healthAlliance (FPSC) Limited, as a subsidiary, is also a Crown entity subsidiary in terms of the Crown Entities Act 2004, owned by a Crown entity and subsequently parented by multiple Crown entities. From 2016, it has provided its own Statement of Intent and Statement of Performance, as requested by the Minister of Health. This Statement of Intent covers healthAlliance FPSC only.

Both healthAlliance companies are public benefit entities. They are domiciled in New Zealand, as defined under N.Z. International Accounting Standard 1 (IAS1) and incorporated in New Zealand. healthAlliance FPSC’s primary objective is to provide shared services to its DHB Customers; where appropriate these services are also provided for approved external organisations. As Crown Entities operating within the public health sector, the healthAlliance Group complies (in so far as they are relevant) with the objectives and functions set out in the New Zealand Public Health and Disability Act (NZPHDA) in respect to DHBs, and the Crown Entities Act in respect to Crown Entities and Crown Entity subsidiaries.

OPERATING RESPONSIBILITIES healthAlliance FPSC operates in a sustainable manner so that its services benefit both current and future customers. In order to meet this objective, we:

+ Maintain an appropriate business model that is sustainable, cost-effective and meets the ongoing shared service needs of its stakeholders.

+ Have a clear governance and decision-making framework in place which articulates the respective roles and responsibilities of healthAlliance FPSC and our customers.

+ Maintain effective relationships with stakeholders that are mutually supportive and productive. + Provide high-quality shared services effectively and efficiently. + Have a sustainable, competent and engaged workforce. + Maintain effective systems to establish a baseline of performance and cost data for the measurement of

gains to the sector. + Maintain appropriate monitoring tools and performance issue resolution processes for initiatives as they are

implemented. + Develop and maintain policies appropriate for the business, including risk management policies.

STATUTORY AND COMPLIANCE REQUIREMENTS As a Crown Entity subsidiary, the Company is required to comply with a variety of legislation including the:

+ Companies Act + New Zealand Public Health and Disability Act + Crown Entities Act + Public Finance Act + Official Information Act

healthAlliance FPSC has established mechanisms to ensure it meets its legal compliance obligations and the relevant Health and Safety legislation.



OPERATIONAL PROCESSES healthAlliance FPSC is required to operate within the functions, powers and constraints outlined above. Operational policies and procedures have been developed concerning the manner in which healthAlliance FPSC conducts its operational processes.

DIVIDEND POLICY healthAlliance FPSC’s objective is to break even each financial year. Any surplus generated is returned to its DHB Customers through reduced service charges.

TREATY OF WAITANGI healthAlliance FPSC will provide shared services to the population of New Zealand, as served by the DHBs. For information about the populations those DHBs serve, and the DHBs health profiles, please refer to their Statements of Intent.

Our Governance and Accountability CORPORATE GOVERNANCE The Board of healthAlliance N.Z. Limited is appointed by its shareholders and has an independent Chairperson. In turn, healthAlliance N.Z. Limited appoints the Board of healthAlliance FPSC. The healthAlliance FPSC Board meets six times per year, and the Audit and Risk Committee three times per year.

The functions and purpose of healthAlliance (FPSC) Limited are set out in this Statement of Intent, which has been developed on the basis of Annual Plans. These mechanisms are supported by the Minister’s Letter of Expectations to shareholding DHBs.

Performance is monitored by the Board, and the Chairperson reports to the Northern Region’s Regional Governance Group (comprising Northern Region Chairs, CEOs and CMOs). Furthermore, the DHB appointed Directors provide feedback to shareholder Boards.

MINISTERIAL POWER TO DIRECT healthAlliance FPSC will ensure that decision-making processes comply with all legislative requirements to consult with, or notify, the Minister of Health. There is no intention to routinely or regularly report matters to the Minister. Any Ministerial directions will generally be dealt with through the Board Chair, on behalf of the Board and shareholding DHBs.

INFORMATION REQUIRED BY MINISTERS healthAlliance FPSC commits to provide Ministers with information as required, to enable timely responses to:

+ Parliamentary questions + Routine Ministerial correspondence + Select Committee inquiries

healthAlliance FPSC is required to comply with the provisions of the Official Information Act.



Our People OUR VALUES Our Values underpin our success as an organisation, and are what defines us within a complex environment. Continuing to identify opportunities to embed these into all phases of the employee lifecycle ensures they remain ‘live’ and complement those of our stakeholders.

OUR CAPABILITY AND OPERATING MODEL As part of our transformation programme we are reviewing our Capability and Operating Model.

PEOPLE & CULTURE PLANS We recognise that our people, their capability and engagement is at the centre of everything we do. The People Strategy will align our activity against a roadmap towards maturity in the following areas;

+ Leadership Capability Growing and attracting people leaders who are skilled in motivating, coaching and rewarding great performance.

+ Inclusive Capability Development Our workforce is diverse, and our ability to meaningfully connect with and grow its capability is dependent on an agile and comprehensive framework that supports participation at every level.

+ Health, Safety and Wellbeing More than just staying physically safe in the workplace, a holistic approach to employee wellness is recognised as a key driver for engagement.

+ Accessibility and Empowerment Ensuring our people have access to the right knowledge, insight and frameworks; this is about getting the basics right, streamlining people processes and creating valuable space to focus on the customer.



GOOD EMPLOYER The Crown Entities Act 2004 Section 118, places a requirement on all Crown Entities to be good employers by ensuring processes and procedures are in place for the fair and proper treatment of all employees. healthAlliance FPSC takes its responsibility as a good employer very seriously and is committed to promoting and maintaining the health, safety and wellbeing of its staff in the workplace. We acknowledge our responsibilities under Health & Safety employment legislation. Health & Safety representatives have been appointed and trained, policies are in place and health, safety and wellbeing services are available to staff.

EQUAL EMPLOYMENT OPPORTUNITIES healthAlliance FPSC promotes and encourages equal employment opportunities. healthAlliance FPSC is proud of the diversity of its workforce and is committed to ensuring there is awareness of the need to provide fair and equitable opportunities for all employees and potential employees.

OUR STRUCTURE The Board appoints the Chief Executive Officer (CEO) who is responsible for the day-to-day operations of healthAlliance FPSC. The CEO is supported by an Executive Leadership Team who are accountable to the CEO in assisting with the overall management of healthAlliance FPSC as a company and leading their functional responsibilities.

ORGANISATIONAL STRUCTURE AT 30 JUNE 2019



OUR ‘FULL TIME EQUIVALENT’ (FTE) NUMBERS

Current FTEs and future forecasted FTE below are based on information known at 30 April 2019:

For the year ended 30 June 2018

Actual 2019

Forecast 2020

Forecast 2021

Forecast 2022

Forecast 2023

Forecast healthAlliance (FPSC) Limited

Total hA (FPSC) Limited1 167 260 273 273 273 273

1 Increase in 2019 FTE primarily relates to the transition of the Finance function to healthAlliance FPSC



Our Stakeholder Engagement healthAlliance FPSC operates in a large, complex and dynamic environment. Critical to our success is the requirement that we build and maintain strong and effective relationships with key stakeholders, whilst ensuring compliance with statutory obligations. healthAlliance FPSC engages at a number of levels within the overall health and central government environments including:

+ Regional governance groups and supporting sub governance groups + DHB boards, including audit and finance committees + DHB executive teams & DHB management + National advisory groups including the Ministry of Health Services Commissioning Directorate + New Zealand Health Partnerships Limited + PHARMAC + Ministry of Business, Innovation and Employment (MBIE) + Treasury + Ministry of Health + Audit NZ

The Statement of Intent highlights the priority of continuing to develop these relationships and the effectiveness of governance and decision making processes to support the Northern Region DHBs and health sector as a whole. It is the intention of healthAlliance FPSC to further strengthen central agency engagement to facilitate regional consistency and alignment.

STATUTORY OBLIGATIONS There are a number of critical drivers, compliance, and statutory obligations that healthAlliance FPSC must respond to as part of our day-to-day responsibilities. These include:

Treasury + Asset management processes are implemented + Compliancy with required accounting standards Ministry of Health + Governance, funding, and approval related processes Audit NZ + Finance and reporting standards + Annual Audit outcomes

Ministry of Business, Innovation and Employment + Government Rules of Sourcing



NORTHERN REGION COLLABORATION The transformation and shape of healthAlliance FPSC is evidence of collaboration between the Northern Region DHBs. Northern Region DHBs initiated the establishment of regional governance groups to support regional decision-making related to the delivery of shared services to the DHBs. These governance groups include the:

+ Northern Region Regional Governance Group + healthAlliance FPSC Board + healthAlliance FPSC Audit and Risk Committee + DHB Boards + DHB Audit and Risk Committee + Regional CFO Governance Group + Regional Capital Committee

The Central Agency groups provide strategic direction and alignment to regional planning/prioritisation guided through:

+ DHB Annual Plans + Health sector efficiency programmes + National and regional plans including the Northern Region Health Plan and the Minister of Health’s ‘Letter

of Expectations’ to DHBs


Statement of Performanceour


Our Statement of Performance Our Statement of Performance summarises the impacts healthAlliance FPSC wants to make in FY19/20 and the results we expect to deliver for each of our output classes.

In addition to these measures, healthAlliance FPSC as an organisation also measures itself against its Annual Plan and the achievement of its Service Level Agreements with Northern Region DHB Customers, which are approved by the healthAlliance FPSC Board and Shareholders. Reporting against these commitments is discussed on a regular basis by the Executive Leadership Team, Board and Shareholders.

OUTPUT CLASSES healthAlliance FPSC measures its performance through three major output classes:

+ Regional Shared Services Enabling the Northern Region DHBs through the provision of efficient and effective shared services.

+ Regional Procurement Aggregator Leveraging the combined volumes of Northern Region DHBs for best quality, service, technology and price in consumables, capital items and services; ensuring operational efficiencies in the procurement of goods and services.

+ Regional Supply Chain Leveraging systems and processes to provide efficiencies in the supply chain and managing inventory, to provide on-time availability with reduced held stock.



DELIVERING OUR PLAN Our Statement of Performance summarises the key focus areas for FPSC and the results we intend to deliver.

Output Class Description Measure Regional Shared Services

Enabling the Northern Region DHBs through the provision of efficient and effective shared services.

Delivery of shared services within agreed funding envelope

Measure =

+ Delivery of approved healthAlliance FPSC Operating budget within +/- $200k.

+ Procurement Capability Index [PCI] score of 3.2 or better.

+ Average Regional Accounts Receivable collection days (calendar days from invoicing to receipt of payment) of 35 days or less.

+ Average Regional Accounts Payable cycle time (calendar days from invoice received date to payment date) of 30 days or less.

+ DIFOT (Delivery in Full on Time) for managed inventory held at 93.8%.

Regional Procurement Aggregator

Leveraging the combined volumes of Northern Region DHBs for best quality, service, technology and price in consumables, capital items, and services; ensuring operational efficiencies in the procurement of goods and services.

Deliver annualised OPEX savings to the Northern Region DHBs and an overall return on investment.

Measure =

$9 million annualised OPEX savings in FY19/20 contributing to an overall return on investment of 8:1 or better on procurement funding cost.

Regional Supply Chain

Leveraging systems and processes to provide efficiencies in the supply chain and managing inventory, to provide on-time availability with reduced held stock.

Availability of Oracle Inventory Managed Surgical Devices and Consumables

Measure > 98% availability


Financial Forecastour


Our Financial Forecast Statement of Responsibility The information contained in this Statement of Performance has been prepared in accordance with the Public Finance Act and the Crown Entities Act 2004.

healthAlliance FPSC is responsible for: + The preparation of the financial statement and the judgements herein + Establishing and maintaining a system of internal control designed to provide reasonable assurance on

the integrity and reliability of the financial reporting

These financial statements are prepared in accordance with the statement of concepts and consistent use of accounting principles from period to period is implicit.

These financial statements have been prepared on the basis that the organisation is a going concern and expects to continue operations for the foreseeable future.

In the opinion of healthAlliance FPSC, the forecast financial statements fairly reflect the financial position and operations of healthAlliance (FPSC) Limited.

Forecast Financial Statements The forecast financial statements for the four years ending 30 June 2023 are included.

healthAlliance FPSC’s main financial objective is to provide services within the agreed funding envelope. Revenue is planned to be equal to total expenses as healthAlliance FPSC only charges net expenses to its shareholder DHBs and is effectively a not-for-profit organisation with the shareholding DHBs carrying the budget risk. Financial forecasts (including FTE forecasts on page 20) are based on the continuation of existing services that healthAlliance FPSC provides to its current Customers. However, the financial forecasts reflect a transition of Finance services to healthAlliance (FPSC) Limited from 1 January 2019.

The Supply Chain and Northern Region Procurement functions have been under the effective management of healthAlliance (FPSC) Limited from the 1st of July 2016, and from the 1st of July 2017 these functions formally transferred to healthAlliance (FPSC) Limited by resolution of the Board. The Finance services function was formally transferred to healthAlliance (FPSC) Limited by board resolution with an effective management date of 1 January 2019. For clarity, in the healthAlliance (NZ) Limited Statement of Intent for the past year the results have been restated to reflect the transfer of the finance functions.

Where shareholder DHBs request us to develop new services - or expand current services through approved business cases - budgets and FTE numbers will flex accordingly.

If new opportunities to provide additional services do arise, they will only be undertaken if the related additional revenue is forecast to be equal to (or greater than) any additional expenditure. It is anticipated, at this stage, that any significant changes in revenue generation and expense forecasts will be as a result of changes in healthAlliance FPSC /DHB capital programmes.

healthAlliance FPSC earns revenue by charging DHBs, and other Customers for services provided. Currently all Customers of healthAlliance FPSC are District Health Boards or affiliated organisations. Funding sources and approvals for healthAlliance FPSC is negotiated directly with Northern Region DHBs.

Funding is provided directly from DHB shareholders in accordance with the Shareholders Agreement. Consequently, healthAlliance FPSC sources all funding from Shareholders on an ‘as required’ basis and does not operate with a standby banking facility.

The classes of output healthAlliance FPSC expects to supply are detailed on page 10.

The expected revenue to be earned and expenses to be incurred for each class of outputs are as follows (i.e. revenue is equal to expenditure for all classes of outputs).



1. Forecast Statement of outputs For the year ended 30 June ($000s)

2018 2019 2020 2021 2022 2023 Audited Forecast Forecast Forecast Forecast Forecast

healthAlliance (FPSC) Limited Finance and Corporate services 0 3,463 7,510 7,660 7,813 7,969 Procurement 5,377 6,993 8,269 8,434 8,603 8,775 Supply Chain 10,835 11,619 12,415 13,134 13,811 14,515 Total hA (FPSC) Limited Outputs 16,212 22,075 28,194 29,228 30,227 31,259

FORECAST STATEMENT OF EXPENDITURE FOR OUTPUTS For the year ended 30 June ($000s)

Personnel

Serv hANZ

Serv NZHP

Depreciation

Other Expenses Total

healthAlliance (FPSC) Limited Finance and Corporate services 6,348 514 0 7 641 7,510 Procurement 6,174 314 989 7 785 8,269 Supply Chain 11,001 615 0 46 753 12,415 Total Outputs 23,523 1,443 989 60 2,179 28,194

FORECAST STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June ($000s)

2018 Audited

2019 Unaudited

2020 Budget

2021 Forecast

2022 Forecast

2023 Forecast

healthAlliance (FPSC) Limited

Revenue SLA Revenue from NR DHBs

13,469 20,516 26,740 27,745 28,714 29,716

SLA Revenue from hANZ 390 995 1,109 1,131 1,154 1,177 Other Revenue 1,111 564 345 352 359 366 Total Revenue 14,970 22,075 28,194 29,228 30,227 31,259 Expenses Personnel incl Outsourced

13,603 18,546 23,524 24,347 25,199 26,081

Services from hANZ 561 1,083 1,443 1,472 1,501 1,531 Services from NZHP 927 942 989 1,009 1,029 1,050 Depreciation 51 49 60 178 232 286 Other Expenses 1,070 1,455 2,178 2,222 2,266 2,311

Total Expenses 16,212 22,075 28,194 29,228 30,227 31,259 Total Comprehensive Income

(1,242) 0 0 0 0 0

Note: The 2018 loss is a result of organisational transition costs.



FORECAST STATEMENT OF MOVEMENTS IN EQUITY For the year ended 30 June ($000s)

2018 Audited

2019 Unaudited

2020 Budget

2021 Forecast

2022 Forecast

2023 Forecast

healthAlliance (FPSC) Limited Equity at Beginning of Year 1,920 678 678 678 678 678 Net Surplus for Year (1,242) 0 0 0 0 0 Paid Up Shares Issued 0 0 0 0 0 0 Equity at End of Year 1,920 678 678 678 678 678

REVENUE FROM RELATED PARTIES


2018 Audited

2019 Unaudited

2020 Budget

2021 Forecast

2022 Forecast

2023 Forecast

healthAlliance (FPSC) Limited Revenue from Related Parties Northern Region DHBs 13,469 20,516 26,740 27,745 28,714 29,716 healthAlliance NZ (Parent) 390 995 1,109 1,131 1,154 1,177 Total Revenue from Related Parties

13,859 21,511 27,849 28,876 29,868 30,893

FORECAST OF FINANCIAL POSITION For the year ended 30 June ($000s)

2018 Audited

2019 Unaudited

2020 Budget

2021 Forecast

2022 Forecast

2023 Forecast


Current Assets Cash, Bank & Investments 1,477 3,088 2,816 2,594 2,376 2,161

Trade & Other Receivables 2,241 100 100 105 110 115

Total Current Assets 3,718 3,188 2,916 2,699 2,486 2,276

Long-term Assets

Term Receivables 2,192 2,192 2,192 2,192 2,192 Property, Plant and Equipment 157 200 490 712 930 1,144 Total Long-term Assets 157 2,392 2,682 2,904 3,122 3,336 Total Assets 3,875 5,580 5,598 5,603 5,608 5,612 Current Liabilities Provision & Accruals 1,256 1,561 1,579 1,467 1,351 1,229

Employee Entitlements 1,182 2,154 2,154 2,229 2,307 2,388

Total Current Liabilities 2,438 3,715 3,733 3,696 3,658 3,617

Long-term Liabilities Employee Entitlements 759 1,187 1,187 1,229 1,272 1,317

Total Long-term Liabilities 759 1,187 1,187 1,229 1,272 1,317

Total Liabilities 3,197 4,902 4,920 4,925 4,930 4,934 Net Assets (Liabilities) 678 678 678 678 678 678

Shareholder Capital 0 0 0 0 0 0

Retained Earnings 678 678 678 678 678 678

Total Equity 678 678 678 678 678 678



FORECAST STATEMENT OF CASHFLOWS For the year ended 30 June ($000s)

2018 Audited

2019 Unaudited

2020 Budget

2021 Forecast

2022 Forecast

2023 Forecast


Cash Flows - Operating Activities

Receipts from Services 15,866 24,991 30,756 31,907 33,021 34,173 Other Income 805 1,668 1,705 1,740 1,774 Interest Received 23 44 Total Revenue - Operating Activities

15,889 25,840 32,424 33,612 34,761 35,947

Payments to employees and suppliers

(15,233) (24,137) (32,346) (33,434) (34,529) (35,662)

Interest Paid Total Expenses (15,233) (24,137) (32,346) (33,434) (34,529) (35,662) Net Cash Flow - Operating Activities

656 1,703 78 178 232 285

Cash Flows – Investing Activities

Purchase of Assets (4) (92) (350) (400) (450) (500) Cash Flows – Financing Activities

Borrowings

Net Cash flow 652 1,611 (272) (222) (218) (215)

Opening Cash 825 1,477 3,088 2,816 2,594 2,376 Closing Cash 1,477 3,088 2,816 2,594 2,376 2,161

FORECAST CAPITAL SPEND


2018 Audited

2019 Unaudited

2020 Budget

2021 Forecast

2022 Forecast

2023 Forecast

healthAlliance (FPSC) Limited Business Applications Other Equipment 4 92 350 400 450 500 Total Forecast Capital Spend 4 92 350 400 450 500



PURPOSE AND DISCLOSURES

The SPE financial forecasts have been prepared to indicate the likely impact of implementing healthAlliance FPSC’s strategic direction, and to enable stakeholders to participate in setting expectations for outputs. The purpose of the financial statements is to assist the Northern Region DHBs consideration of funding, and also serves to provide a base against which the company’s actual performance can be assessed.

It should be noted that:

The information disclosed is indicative only and may not be appropriate for any other purpose. Actual results are likely to vary from the information presented here and the variations may be material. The forecast financial statements have been prepared based on actual events, transactions and financial

results up to May 2019, and assumptions about future events that are reasonably expected to occur. It is reasonable to assume that these forecasts may change significantly should the company engage in expansion opportunities, or should there be any significant changes to the environment in which we transact. It is not intended that this published material will be updated for additional changes or unexpected future events.

NOTES AND ASSUMPTIONS:

While there are some implicit assumptions included around the forecasts, the Company has considered factors that may lead to a material difference between information in the forecast financial statements and actual results.

These factors include:

In the 2018/19 year finance services was transferred from health Alliance NZ Ltd to health Alliance FPSC Ltd effective 1 Jan 2019. This added forecasted costs of $3.463m. Full year impact in 2020 of $7.51m.

Personnel costs forecast to be a 5% increase in 2020, 2021-2023 forecast at 3.5% p.a. Other costs – Based on CPI inflation at 2% p.a. Any cost savings measures and efficiency gains arising out of strategic priorities have been fully

incorporated into the financial forecasts. All forecast costs to be fully funded across the forecast period 2020-2023. Source of Funds - In FY2020 capital funds will be fully sourced from internal cash reserves, and then as

we move to later years funding will move on a pro-rata basis to a depreciation funded model.



Statement of Significant Accounting Policies The following is a summarised description of the accounting policies used in preparation of the Statement of Intent. A full description of the accounting policies used by the group can be found in the 2015/16 Annual Report.

General Accounting Policies REPORTING ENTITY healthAlliance (FPSC) Limited is a company wholly-owned by healthAlliance N.Z. Limited. healthAlliance N.Z. Limited is jointly owned by Northland, Waitemata, Auckland and Counties Manukau Health District Health Boards. healthAlliance FPSC’s ultimate parent is the New Zealand Crown. healthAlliance (FPSC) Limited is a crown entity subsidiary in terms of the Crown Entities Act 2004, owned by the Crown and domiciled in New Zealand. healthAlliance FPSC is a public benefit entity for financial reporting purposes as defined under NZ IAS 1.

The group financial statements include healthAlliance (FPSC) Limited and its parent, healthAlliance N.Z. Limited.

Basis of Preparation STATEMENT OF COMPLIANCE The financial statements have been prepared in accordance with the requirements of the Crown Entities Act 2004 and the Financial Reporting Act 1993 which include the requirement to comply with generally accepted accounting practice in New Zealand (NZ GAAP). The financial statements have been prepared in accordance with Tier 1 Public Benefit Entity accounting standards.

FUNCTIONAL AND PRESENTATION CURRENCY

The financial statements are presented in New Zealand Dollars (NZD), rounded to the nearest thousand. The functional currency of healthAlliance FPSC is NZD.

MEASUREMENT BASE

The financial statements are prepared on the historical cost basis.

FORECAST FINANCIAL INFORMATION

The forecast financial statements have been prepared in accordance with Public Benefit Entity Financial Reporting Standard 42, Prospective Financial Statements. healthAlliance FPSC is required under the Crown Entities Act 2004 to present forecast financial statements for the next 4 years as part of its Statement of Intent and forecast financial statements for the 30 June 2018 financial year as part of the Statement of Performance

healthAlliance FPSC is responsible for the forecast financial statements presented, including the assumptions underlying statements and all other disclosures. The forecast statements have been prepared on the basis of best estimates as to future events which healthAlliance FPSC expects to take place. The Company has considered factors that may lead to a material difference between information in the forecast financial statements and actual results.



PARTICULAR ACCOUNTING POLICIES The following particular accounting policies which materially affect the measurement of results and financial position are applied:

REVENUE RECOGNITION

Revenue is recognised on receipt or delivery of service, whichever is the earlier.

RECEIVABLES AND PREPAYMENTS

Receivables and Prepayments are stated at expected realisable value after providing for doubtful debts.

STATEMENT OF CASH FLOWS

Cash balances on hand, held in bank accounts, demand deposits and other highly liquid investments in which healthAlliance FPSC invests as part of its day-to-day cash management.

Operating activities include cash received from all income sources of healthAlliance FPSC and records the cash payments made for the supply of goods and services.

CHANGES IN ACCOUNTING POLICIES

There have been no changes in accounting policy.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are included at cost less depreciation to date.

DEPRECIATION

Depreciation is provided on a straight-line basis on all tangible property, plant and equipment at rates calculated to allocate the cost, less estimated residual value, over their estimated useful lives.

Major depreciation rates are:

IT equipment: 12% to 33%

Other equipment: 10% to 20%

Leasehold Improvements: 11% to 33%

INTANGIBLE ASSETS

Software acquired by the Group is stated at cost less accumulated depreciation and impairment losses. Where software is developed or modified internally, the cost of internal staff time is added to the value of the software where future economic benefits will flow to the Group.

AMORTISATION

Amortisation is recognised in the surplus or deficit on a straight line basis over the estimated useful lives of intangible assets. Major amortisation rates are:

Software: 12 to 33%

LEASES

Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased items, are recognised as expenses in the periods in which they are incurred.

PAYABLES TO SHAREHOLDERS

Payables to shareholders are advances payable on demand and are interest free.



EMPLOYEE ENTITLEMENTS

Employee benefits that are due to be settled within the next 12 months are measured at nominal values based on entitlements at current rates. The value of benefits that will be settled beyond 12 months - after the end of the period in which the employee renders the related service - have been calculated on an actuarial basis. This takes into account the likelihood that staff will reach the point of entitlement, their years of service, and the present value of estimated future cash flows.


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Statement of IntenthealthAlliance FPSC contributes to supporting the Northern Region DHBs’...

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