Mr. Stephen Mulvany:

I thank committee for the invitation to attend. The HSE spent €14.3 billion on the provision of health and social care services in 2017. This excludes capital spending. The 2018 budget for the provision of these services is €14.6 billion, which is €224 million, or 1.6%, above what was spent in 2017. The 2018 budget is €608 million, or 4.4%, higher than the 2017 budget. This is made up of pay rate funding for existing staffing levels at €278 million, funding support for the existing level of services, including demographics, at €134 million and funding for new developments at €195 million. To the end of August 2018 the HSE has spent €10 billion on the provision of health and social care services to service users, patients and their families. This is €485 million, or 5.1%, above the level of budget available to the end of August. Some 43%, or €206 million, of this €485 million overrun relates to unfunded cost growths in 2018 that are outside of the areas of spend which are amenable to normal management control efforts or relate to exceptional costs such as those associated with Storm Emma. This includes the primary care reimbursement service at €50 million, the State Claims Agency at €32 million, local demand led schemes and overseas treatment at €24 million, pensions at €9 million, acute hospital income issues related to the actions of insurers at €63 million and exceptional items, including Storm Emma, at €28 million. Some 37%, or €180 million, of this €485 million overrun relates to a shortfall in the target savings necessary to offset the unfunded costs of services that were running throughout 2017. Despite this, €37 million of savings under the value improvement programme are being reported by our community healthcare organisations and hospital groups at the end of August. This figure is indicated to be approximately €60 million in savings by year end. In addition to this, there are significant centrally generated drugs and medicine related savings being delivered by the primary care reimbursement service, for example, €27 million on a clinical protocol driven access initiative and in acute hospitals €12 million on the framework agreement with suppliers.

Finally, 20% or €99 million of this €485 million overrun relates to other unfunded cost growths in 2018 within our operational service areas. The provision of disability services to services users with intellectual and physical and sensory disabilities accounts for €29 million of this residual €99 million - emergency residential places at €19 million, costs associated with HIQA registration of residential services at €7 million and home support at €3 million. Behind these numbers there are many individual stories of service users with intellectual disabilities requiring residential care on a crisis basis due to a breakdown in their family caring arrangements. On a positive note, very substantial progress has been made in achieving HIQA registration of residential centres. The provision of services to older persons accounts for €22 million of this residual €99 million overrun, that is, home support at €5 million, transitional care beds at €2 million and public residential units at €15 million. Ireland's population aged 85 years and older is growing at approximately 4.3% per annum, which is significantly above than the EU average. The provision of acute hospital services accounts for €50 million of the residual €99 million with this being partly attributable to additional activity levels and the growing complexity and cost of care as the age of the average patient increases. In addition, bed occupancy levels in our acute hospitals, at 94%, are the second highest in the OECD and are well above the OECD average of 77%. Levels consistently above 85% are indicative of a system operating under considerable stress, with knock-on implications for efficiency, quality and cost.

Based on the data to the end of August, it is clear that the full year cost of providing essential health and social care services in 2018 will significantly exceed the available funding. In that context, the HSE very much welcomes the announcement by the Minister for Public Expenditure and Reform that he intends to allocate an additional €700 million to the health service in 2018, by way of a Supplementary Estimate. It is particularly welcome that it has been indicated that this additional allocation will remain in the base funding of the health service going into 2019. It is understood that €625 million of this €700 million will be allocated to the HSE to offset overruns in operating costs, with €20 million being allocated to support ongoing HSE capital investment.

HSE national directors and their teams, as part of the ongoing performance management process, have been working throughout the year reviewing current costs with a view to reducing the level of overrun and this will continue and be intensified to year end where this is practical. This is necessary to minimise the amount of any residual 2018 overrun.

That concludes my opening statement.