FINANCIAL
IMPLICATIONS
Joint memorandum by the following Chief Executives
working in the area covered by the County Durham and Tees Valley
Strategic Health Authority (FT23)
Moira Britton—Chief Executive, Tees and
North East Yorkshire NHS Trust, which provides services for people
with mental illness and learning disability.
Ken Jarrold CBE—Chief Executive, County Durham
and Tees Valley Strategic Health Authority
Nik Patten—Deputy Chief Executive, South
Tees NHS Trust which provides a full range of tertiary and secondary
acute services.
Joan Rogers—Chief Executive, North Tees
and Hartlepool NHS Trust which provides acute services and is
an applicant for Foundation status.
Chris Willis—Chief Executive, North Tees
Primary Care Trust
1. The memorandum briefly comments on the
following issues:
— the proposal to introduce NHS Foundation
Trusts (para 2)
— financial implications (paras 3 and
4)
— staffing implications (paras 5-7)
— governance and accountability (paras
8-11)
— impact on quality of management and
quality of patient care (para 12)
— impact on the wider NHS (paras 13-15)
THE PROPOSAL TO INTRODUCE NHS FOUNDATION TRUSTS
2. We welcome the proposal to introduce
NHS Foundation Trusts. Foundation Trusts are the logical next
step in shifting the balance of power in the NHS. The 1974 reorganisation
of the NHS paid little attention to the management of local services.
The reforms introduced in 1982, the introduction of general management
in 1984 and the establishment of NHS Trusts in the early 1990s
gradually shifted the balance of power towards local management.
Foundation Trusts offer the opportunity for local people working
with local clinicians and managers to deliver local services.
We believe that management will be most effective
when there is maximum delegation to local level within the national
framework of values, standards, regulation inspection and funding.
We welcome the intention to make foundation status available to
all high performing Trusts including those that provide services
for people with mental illness and learning disability. It will
be important to revisit the guidance on NHS Foundation Trusts
to ensure that the roles and responsibilities of these Trusts
are fully taken into account, including the strong emphasis on
whole system working.
3. We welcome the financial freedoms proposed
for Foundation Trusts including the ability to retain proceeds
from asset disposals and operating surpluses and access to capital
from public/private sources. However it is clear that these freedoms
will be exercised within a strict regime supervised by the Independent
Regulator. For example the access to capital is subject to a prudential
borrowing requirement set by the Regulator and there is a prohibition
on the use of regulated assets for borrowing. For larger projects
financed by the Private Finance Initiative or NHS Capital, the
current approval mechanisms will apply.
4. It is important to remember that an NHS
Foundation Trust's principle source of revenue will be from legally
binding agreements with Primary Care Trusts. Ultimately 90% of
clinical activity will be paid for under the national tariff described
in Reforming NHS Financial Flows. These financial arrangements
will limit the ability of Foundation Trusts to pay higher salaries
(see para 7) and will prevent the development of two tierism between
Foundation Trusts and NHS Trusts. Most of the income of both types
of organisation will come from the same source and the same tariff
will apply. This means that commissioning will be about quality
and volume not about price.
STAFFING IMPLICATIONS
5. We welcome the freedoms proposed for
Foundation Trusts and in particular the:
— flexibility to offer new rewards
and incentives;
— the right of staff to elect some
members of the Board of Governors;
— the preservation of existing terms
and conditions including access to the NHS Pension scheme and
the requirement to pay employer contributions.
6. We believe that the fears about NHS Foundation
Trusts paying substantially higher wages and "poaching"
staff are misplaced. NHS Trusts already have scope for this but
have only exercised their freedoms in a very small number of cases.
However Foundation Trusts will not be able to afford to pay substantially
higher wages for most staff because their income comes from the
same source as NHS Trusts and they will work at the same price
levels. It is important to note that NHS Trusts will also have
staffing flexibilities under the proposed Agenda for Change.
7. NHS Foundation Trusts will be expected
to participate in education and training, including providing
clinical learning opportunities and placements.
GOVERNANCE AND
ACCOUNTABILITY
8. We welcome the governance and accountability
arrangements proposed and the new form of social ownership described
in the Guide to NHS Foundation Trusts. The proposals introduce
a limited form of direct local democracy for the first time in
the history of the NHS. All previous arrangements have involved
the appointment of Chairs and non-executives. We welcome the proposal
that NHS Foundation Trusts should have considerable freedom to
develop governance arrangements to suit their local circumstances.
9. We strongly support the proposal that
the main commissioning Primary Care Trusts should be represented
on the Board of Governors.
10. We recognise that NHS managers have
much to learn from colleagues in local Government about relationships
with elected members and that the culture of the NHS will have
to change in order to make a success of the governance arrangements.
11. We believe that the Boards of Governors
and Management Boards of NHS Foundation Trusts should be given
as much freedom as possible within the national framework, and
that reporting requirements should not undermine local accountability.
IMPACT ON
QUALITY AND
MANAGEMENT AND
QUALITY OF
PATIENT CARE
12. We believe that the quality of management
will be improved by maximum delegation to local level. The quality
of patient care depends on many factors including the skills,
experience and ability of the staff, the number of staff and financial,
capital and equipment resources. However we believe that better
management makes a contribution to the quality of patient care
by developing and supporting staff, providing opportunities for
professional and personal development and ensuring that the organisation
obtains best value from all its resources.
IMPACT ON
THE WIDER
NHS
13. We understand the concern about relationships
between NHS Foundation Trusts and the wider NHS and social care
systems. However we believe that there are sufficient safeguards
in the proposals to ensure that the Foundation Trusts remain part
of the wider NHS. It is important to assess these safeguards in
the context of the future NHS, being defined by values, standards,
regulation, inspection and funding and not necessarily by provision.
14. The safeguards include the:
— powers of the Independent Regulator
to agree the licence for the Trust covering a wide range of issues
including the services to be provided, the application of clinical
and service quality standards, the duty of partnership with other
NHS and Social care bodies, financial duties, including restrictions
on disposal of assets, the requirement to provide statistical
and financial information;
— power of the Independent Regulator
to require additional reporting, issue formal warnings, remove
members of the Management Board, require new elections to the
Board of Governors and transfer assets to another Trust;
— role of the Commission for Health
Audit and Inspection in inspecting NHS Foundation Trusts;
— requirement to consult the Overview
and Scrutiny Committee about any substantial change in the provision
of services and the power of the Scrutiny Committee to refer the
changes to the Independent Regulator;
— legally binding service agreements
with Primary Care Trusts, based on the national pricing structure
and subject to compulsory arbitration. We recognise that PCTs
will need considerable development support as they prepare for
these arrangements;
— limits on private practice as a percentage
of total income;
— requirement to participate in Information
Technology systems scheduled in the licence.
15. However even with these safeguards it
will be important for applicants for foundation status to demonstrate
at local level their commitment to relationships with the wider
NHS and whole system working.
CONCLUSION
16. We welcome the proposal to introduce
NHS Foundation Trusts as the logical next step in shifting the
balance of power in the NHS.
30 January 2003
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