Memorandum by The Department of Health
(FT21)
INTRODUCTION
The Government welcomes the opportunity provided
by the Select Committee inquiry to set out its policy on the development
of NHS Foundation Trusts.
This memorandum describes the principles which
lie behind the development of the Government's proposals for NHS
Foundation Trusts, outlines the development of the policy and
sets out briefly the key proposals and next steps.
1. The Government's broad aims for the NHS
are to deliver a health service designed around the needs of patients
and improved health outcomes so that wherever NHS patients are
treated they receive high quality care, free at the point of use
and based on need not ability to pay.
2. To deliver this, The NHS Plan set out
a ten year programme of investment and reform to redesign the
NHS around the needs of the patient. The NHS Plan and Delivering
the NHS Plan set out a comprehensive reform programme for the
NHS in line with the four Government principles for public services:
— establishment of explicit national
standards and clear accountability for NHS care—so that
patients know that the care they get will meet national standards
wherever they get treatment, and clinicians and managers know
what standards they will be judged against;
— greater devolution of power and responsibility
from the Department of Health to the clinicians and managers who
are responsible for care at the front line—so that the people
who know best what needs to be done can take action swiftly and
effectively;
— more flexibility for NHS staff—so
that the potential skills of individual members of staff can be
maximised so as best to fit the needs of patients;
— greater plurality of provision and
choice for patients—so that patients can more directly influence
the services provided and decide how services can best meet their
circumstances.
3. Central to this is the Government's ambition
to raise standards in every part of the NHS so that wherever patients
are treated, they get high quality care. To do this the Department
of Health has put in place a comprehensive quality programme based
around:
— the statutory duty of quality set
out in the Health Act 1999;
— a framework of clear national standards—national
service frameworks for cancer, coronary heart disease, mental
health, older people and diabetes have been published with others
covering children, renal services and people with long-term conditions
in preparation—and an independent system of review through
the Commission for Health Improvement;
— open reporting on performance—a
rigorous performance assessment framework and an annual system
of star ratings which assess the individual performance of local
health services;
— a programme of action to improve
performance—the NHS Plan set out how actions would follow
assessment so that those local health services doing well earn
greater freedom and those doing less well get help, support and,
where necessary, intervention.
4. The performance assessment framework,
designed to rate NHS organisations based on their performance
against a number of key indicators, is based on two simple principles:
— patients know there is too much variation
in performance between England's hospitals. That is not primarily
about money. It is about management and organisation. Hospitals
are being ranked on their performance, with more freedom and rewards
for the best and more help for the worst;
— NHS Trusts are rated according to
their performance on the things that matter to patients such as
waiting times and hospital cleanliness.
5. As part of the performance assessment
programme the concept of "earned autonomy" has been
established with greater freedoms for those NHS organisations
who perform well. The more performance improves, the greater autonomy
will be earned. The new system of financial flows the Department
of Health is introducing into the NHS will strengthen the concept
of earned autonomy by giving more resources to those NHS hospitals
who can treat patients more quickly.
6. The programme is not just about additional
freedoms for the best but about targeted improvements for all.
The Department of Health is strengthening the programme of support
available to all NHS Trusts to support their performance so that
none are left behind—and so that standards improve in every
part of the NHS.
7. This support includes a range of programmes
run by the Modernisation Agency, such as the Booking programme,
the Critical Care Programme, the Clinical Governance Board programme,
the Cancer Services Collaborative, the Coronary Heart Disease
Collaborative, the Emergency Services programme and the Action
on Programme. The Modernisation Agency also targets help at those
Trusts which perform less well, with a comprehensive menu of other
programmes for those who need them.
8. Zero star trusts benefit from a targeted
programme delivered by teams in the Modernisation Agency so that
the average zero star-trust is receiving free of charge at least
£250,000 of high quality consultancy advice and support in
2002-03. The most hard-pressed communities, including where appropriate
zero-star trusts, are able to access support from the NHS Bank,
a centrally managed £100 million Special Assistance Fund,
to facilitate service improvements.
9. The performance assessment programme
demonstrates what patients have always known. Different NHS Trusts
have different starting points—some are performing well,
others less well, and a few are persistently under-performing.
The Government recognises that different action and different
programmes are needed to reduce these variations in performance
and to raise standards, depending on the starting position of
individual NHS Trusts. Patients need local health services that
are able to guarantee improvements so the programme of support
for the NHS has been designed to provide a mix of incentives,
freedoms, support and intervention to suit local circumstances
and give improvements across the NHS.
10. Alongside performance assessment is
the choice programme, which aims to offer a wider range of choice
to NHS patients. As well as systems that allow patients to make
well-informed choices about NHS services—such as performance
assessment—and the new financial flows payment by results
system where money will follow the patient, the Government is
committed to increasing plurality of provision for NHS patients.
In the primary care sector this has led to the introduction of
Walk in Centres and NHS Direct alongside General Practitioners.
In secondary care, it has opened up the opportunities for NHS
patients to be treated overseas, in the private sector or in different
organisations within the NHS. But plurality of provision can only
work alongside a performance system that guarantees standards
and quality of care for NHS patients.
11. The proposals for NHS Foundation Trusts
have grown out of this wider reform programme.
12. In April 2002 in Delivering the NHS
Plan: next steps on investment, next steps on reform, the Department
of Health set out proposals for developing a new type of organisation—NHS
Foundation Trusts—that would be fully part of the NHS but
with greater independence from Whitehall control. NHS Foundation
Trust status would be part of the earned autonomy programme, offering
greater freedoms to those organisations that have demonstrated
that additional freedoms will bring improvements for patients.
13. As the Secretary of State set out in
his speech to the New Health Network in January 2002
"A million strong service cannot be run
from Whitehall. Indeed it should not be run from Whitehall. For
patient choice to thrive it needs a different environment. One
in which there is greater diversity and plurality in local services
which have the freedom to innovate and respond to patient needs.
Our reforms about redefining what we mean by
the National Health Service. Changing it from a monolithic centrally-run
monopoly provider to a values-based system where different health
care providers—in the public, private, and voluntary sectors—provide
comprehensive services to NHS patients within a common ethos:
care free at the point of use, based on patient need and their
informed choice and not their ability to pay. Who provides the
service becomes less important that the service that is provided.
Within a framework of clear national standards, subject to common
independent inspection, power will be devolved to locally run
services so they have the freedom to innovate and improve care
for NHS patients.
The implications of this re-definition are profound.
It means that NHS healthcare does not need to be delivered exclusively
by line-managed NHS organisations but by a range of organisations
working within the national framework of standards and inspections.
The task of managing the NHS becomes one of overseeing a system
not an organisation. Responsibility for day to day management
can be devolved to local services. National accountability moves
away from organising a particular institution around large numbers
of targets towards overall systems performance and health outcomes.
That in turn will allow a better concentration on tackling inequalities
and improving health rather than just on improving health services."
DEVELOPMENT OF
NHS FOUNDATION TRUST
POLICY
14. In developing policy for NHS Foundation
Trusts the Department of Health worked closely with local health
services in England and abroad to build on best practice and lessons
learned elsewhere and, crucially, to ensure the proposals met
the needs of local organisations not the needs of Whitehall.
15. The system of earned autonomy was developed
with 3-star Chief Executives who were asked to identify the barriers
staff and management face and to list the freedoms that would
allow staff to deliver improvements to patients more quickly.
This gave five key principles:
— greater management autonomy;
— different accountability structure;
— increased financial freedoms; and
— opportunity to agree HR flexibilities
with staff locally.
16. The barriers and incentives identified
by organisations have been translated into action across the NHS.
Some new freedoms apply to all NHS Trusts, for example the move
to three year planning and a reduction in directions from the
Department of Health. Others, such as the greater financial freedoms
and access to capital, are only available to high performing organisations.
The policy objectives that followed this consultation with Chief
Executives were to deliver:
— greater capacity and the ability
to respond to local circumstances and local priorities immediately;
— greater flexibility for management
to innovate and improve services for patients;
— a different accountability structure
that would allow NHS Foundation Trusts to develop closer links
to their local communities and return local hospitals to their
patients;
— a more outward, less upward looking
structure so that they could focus on delivering services around
the needs of patients not the Department of Health; and
— a commitment to NHS values and principles
so that NHS patients could expect high quality services wherever
they were delivered.
17. There was a body of evidence on systems
reform from Europe considered as part of the policy development
process. In particular, the Department of Health and NHS Chief
Executives discussed the models of healthcare delivery with four
Chief Executives from Denmark, Sweden and Spain, culminating in
a seminar on 22 May 2002 (summary of the presentations attached
at annex A). The experiences of these Chief Executives showed
that the right reforms have the potential to raise performance
across the healthcare sector, with not for profit organisations
leading the way. For example, in Sweden for breast cancer the
time from diagnosis to treatment is 13 days while in Denmark elective
surgery is delivered within two months (data represents performance
over 2001).
18. In delivering improvements, and managing
the risks of change, the key factors in achieving change were
shown to be:
— the need to engage patients within
the system, and to respond to patient choice;
— effective partnership working within
the organisation, with the community and with the wider health
sector;
— a recognisable cultural change that
ensures staff feel empowered to innovate and develop services
that are responsive to local needs;
— willingness to make it happen and
allow genuine freedom from the centre;
— accurate, timely management information;
— greater access to capital to support
development and innovation, and in particular to deliver greater
capacity;
— the flexibility to develop HR policies
with staff locally to reflect the needs and priorities of local
staff; and
— greater flexibility for management
to innovate and improve services for patients locally.
19. NHS Foundation Trust proposals and policy
were further tested with a core group including representatives
from 2-star and 3-star NHS Trusts, Strategic Health Authorities,
Primary Care Trusts and Directorates of Health and Social Care.
The inclusion of different NHS organisations was partly to ensure
that the policy was developed with a view to the needs of whole
health economies, not just individual organisations.
20. This development and research led to
a set of policy objectives based around:
— greater capacity and ability to respond
to local circumstances and local patient needs;
— recognising what the best healthcare
organisations have achieved;
— greater flexibility for management
and staff;
— accountability structures to return
hospitals to their local community;
— freedom from line management by the
Department of Health;
— protection of NHS values and principles
for patients and staff; and
— The Department of Health published
NHS Foundation Trusts Eligibility Criteria and Timetable in July
2002 setting out details of the policy in development. It provided
initial information on eligibility and set out key proposals for
NHS Foundation Trusts.
21. As announced in the Queen's speech in
November 2002, the Government will bring forward legislation to
establish NHS Foundation Trusts as freestanding entities within
the NHS.
22. Following this announcement, the Department
of Health published A Guide to NHS Foundation Trusts. This set
out the detailed policy proposals and structure for NHS Foundation
Trusts and invited preliminary applications from 3-star acute
and specialist NHS Trusts by February 2003.
23. Following this preliminary stage, the
intention is that shortlisted candidates will be invited to submit
second stage applications which will be assessed by a panel drawn
from inside and outside the Department of Health. The Government's
intention is that successful applicants will be announced in September/October
2003 with the first wave of NHS Foundation Trusts established
in April 2004 subject to legislation.
PRINCIPLES UNDERLYING
NHS FOUNDATION TRUST
POLICY
24. The detailed proposals set out in A
Guide to NHS Foundation Trusts have been developed with regard
to four key principles. NHS Foundation Trusts will:
— be part of the NHS family, subject
to NHS standards, values and inspection;
— have autonomy and freedom from Whitehall
so that staff can get on with delivering healthcare;
— engage local communities and staff
as owners of the local hospital; and
— increase plurality of provision and
give patients real choice within the NHS.
NHS STANDARDS, VALUES
AND INSPECTIONS
25. The establishment of NHS Foundation
Trusts is only now feasible having established a rigorous and
robust system of national standards over the last five years.
The introduction of an independent Commission for Health Improvement,
the National Institute for Clinical Excellence, the development
of National Service Frameworks and the performance assessment
framework provide NHS patients with the security that wherever
they are treated, care will be provided in line with NHS principles.
26. In April 2002 the Government announced
a new inspectorate for healthcare bringing together the functions
of the Commission for Health Improvement, the value for money
functions of the Audit Commission and the private healthcare functions
of the National Care Standards Commission. The new Commission
for Healthcare Audit and Inspection will provide independent inspection
and assessment of all healthcare in England and will oversee the
performance ratings system for the NHS. The establishment of CHAI
is subject to forthcoming legislation, but it is expected to come
into effect from April 2004.
27. NHS Foundation Trusts will sit firmly
within the NHS, providing services to NHS patients and operating
against NHS values and principles, inspected by CHAI against NHS
clinical and service standards.
28. NHS Foundation Trusts will not operate
in isolation. They will be part of the wider NHS and subject to
the same duty to work in partnership with other organisations
in the local health economy and as applies to other NHS bodies.
NHS Foundation Trusts will have a statutory duty of partnership
with other NHS organisations. This duty of partnership will underpin
everything NHS Foundation Trusts do—their treatment of staff,
delivery of services, consultation with the local community.
29. The responsibilities that go with this
duty of partnership will be one of the key distinctions between
NHS Foundation Trusts and independent sector providers of NHS
care. Both will contract with PCTs to deliver NHS care against
national clinical and quality standards so that NHS patients are
guaranteed high standards wherever their care is delivered. But
NHS Foundation Trusts will be set up with public benefit, not
commercially driven objectives, and any surpluses derived from
efficiency gains will be used to further their primary objectives
of providing health and related services for the benefit of NHS
patients and the community.
30. From 2003-04, we will be introducing
a new system of "payment by results", bringing about
fundamental changes to the way that funds flow throughout the
NHS. When this is fully implemented, a national set of prices
for all services commissioned in the NHS will be in place (adjusted
for regional cost differences). This national tariff will avoid
hospitals competing on the basis of price. NHS Foundation Trusts
will be free to retain any surpluses they generate, provided these
are reinvested in ways consistent with their health related primary
purpose, providing an incentive to improve efficiency.
31. The introduction of national tariffs
NHS alongside the national standards will ensure that NHS Foundation
Trusts do not recreate any of the excesses of the internal market.
The internal market encouraged hospitals to develop a lower price
tariff and gave preferential treatment to patients registered
with fundholding GPs. This resulted in a two-tier service. The
aim was to attract business from GPs by having lower prices than
other hospitals. This encouraged hospitals to improve the scale
of their business by providing a cheaper rather than a better
service.
32. The internal market in the NHS was a
two-tier system because it created two different types of purchaser—GP
fundholders and Health Authorities. This Government's reforms
have created a single tier of NHS commissioners—PCTs. In
contrast NHS Foundation Trusts will provide services within an
integrated health system that embraces a plurality of providers
including NHS Trusts, and independent healthcare providers based
within the UK and overseas. This does not mean that the NHS becomes
a two- or even three-tier system because all providers of services
to NHS patients will provide treatment that is free at the point
of delivery and will all be inspected by CHAI against the same
national standards.
33. Choice and plurality are developing
in a system where we now have national standards. Patient choice
will become the driving force for the healthcare system. GPs and
commissioners will have a major role in informing patients about
when and where they choose to be treated. The provision of clinical
services to NHS patients will remain at the core of NHS Foundation
Trusts' objectives. As such delivery of regulated and specified
services will continue to form the vast majority of an NHS Foundation
Trust's activity. In order to ensure that NHS Foundation Trusts
continue to focus primarily on servicing the needs of NHS patients
they will be prevented, through their governance structures, from
expanding private provision in excess of commensurate growth in
their expansion of service delivery to NHS patients. This means
that to treat more private patients NHS Foundation Trusts will
have to treat more NHS patients first.
FREEDOM AND
SAFEGUARDS
34. NHS Foundation Trusts will have the
freedom to decide how to meet national targets for improving services
for NHS patients. In developing proposals for NHS Foundation Trusts
the aim has been to avoid replacing one system of central control
with another, as happened with the introduction of NHS Trusts
in 1990. The proposals are not about removing accountability but
moving to a system where there is greater freedom for local decision
making within a robust framework of safeguards to protect the
public interest.
35. For this reason we propose replacing
Whitehall control with a new system of accountability to the public,
patients staff and other local stakeholders through the governance
arrangements and the establishment of the Board of Governors.
A Regulator, independent from the Secretary of State, will monitor
compliance with licence and statutory conditions.
36. The new post of Regulator for NHS Foundation
Trusts will be independent of the Department of Health and established
as a body corporate. The Independent Regulator will not replicate
the Secretary of State's existing powers of direction and will
not have a role in performance management or in the day to day
running of the NHS Foundation Trust. In normal circumstances the
Regulator will have no reason to intervene.
37. The Regulator will be responsible for
ensuring NHS Foundation Trusts operate within the terms of the
licence, and will have clearly defined step-in powers where licence
and statutory conditions are breached. The main functions will
be to:
— grant licences to applicants for
NHS Foundation trusts status in compliance with the provisions
set out in legislation;
— monitor compliance with the licence;
— undertake periodic review of the
licence;
— take steps to mitigate any breach
of the licence; and
— publish an annual report on the activities
of the NHS Foundation Trusts.
38. The Independent Regulator will have
discretion to decide how to carry out these functions within defined
objectives to be set out in legislation. Most importantly, the
Regulator will be subject to a general obligation to act in a
way consistent with the public benefit at all times. The Department
of Health expects the Regulator will develop general guidance
on the sort of parameters that he or she will use in making decisions
when assessing compliance with particular areas of the licence,
for instance in assessing partnership arrangements with other
local NHS organisations or in considering the representation of
partner organisations on the Board of Governors.
39. An NHS Foundation Trust will have the
freedom to manage its resources—staff and assets—to
deliver innovation and reform within a public benefit framework
that:
— includes a primary purpose of providing
health and related services for the benefit of NHS patients and
the community;
— requires it to act in accordance
with NHS values;
— limits other activities to those
that are conducive to and not detrimental to achievement of the
primary purpose; and
— ensures that assets, and any surpluses
it makes, are applied solely to the primary purpose and are not
used to provide dividends or bonuses to its members.
40. These freedoms will be underpinned by
safeguards to protect the public interest. NHS Foundation Trusts
will be part of the NHS and operate as part of the local health
economy. They will operate in a system that:
— upholds the values and principles
of the NHS;
— protects high national standards;
— ensures that its prime purpose of
providing NHS services free at the point of use with treatment
according to need not ability to pay, is met; and
— prevents NHS assets from being sold
off, mortgaged or used for purposes that would be against the
public interest.
41. These safeguards will ensure that patient
care is not compromised and that there is continuity of service
for NHS patients. They will also ensure that NHS staff are treated
with equity and fairness wherever they work in the NHS.
42. NHS Foundation Trusts, as successful
organisations who have demonstrated high quality leadership and
management, will have the flexibility to offer new rewards and
incentives and to explore new ways of working in partnership with
their staff. They will do this within a framework that gives staff
assurances that the transfer to NHS Foundation Trust status does
not mean a worsening of terms and conditions or service.
all staff directly employed by NHS Foundation
Trusts will have full access to the NHS pension scheme:
— NHS Foundation Trusts in the first
wave will be early implementers of the new Agenda for Change pay
system, if agreed; and
— applicants will have to provide a
human resources policy statement agreed in outline with staff
as part of the application process.
43. Within Agenda for Change all organisations
will have freedom to pay staff more to either reward good performance
or to recruit staff to hard to fill vacancies. NHS Foundation
Trusts will be able to build on these local flexibilities. However,
the legislation setting up NHS Foundation Trusts and the licence
under each one will operate will make it absolutely clear that
NHS Foundation Trusts will not be allowed to undermine the ability
of other NHS Trusts to meet their obligations to provide NHS services,
for example by unfairly competing for staff. The Independent Regulator
will be responsible for ensuring that each NHS Foundation Trust
meets its licence and statutory conditions, with a range of step-in
powers to secure compliance.
44. NHS Foundation Trusts will have complete
operational freedom to manage their assets to improve and expand
services and support innovation. To protect continuity of NHS
services there will be provisions, to be set out in legislation,
that will protect those assets required to provide essential NHS
services and prevent borrowing being secured against them. These
assets ("regulated assets") will be protected against
take-over by the private sector or disposal by the NHS Foundation
Trust. An NHS Foundation Trust will be allowed to retain 100%
of the proceeds from asset disposals subject to demonstrating,
to the satisfaction of the Independent Regulator, that the proceeds
from such disposals will be used to further its public interest
mandate, ie further the interests of NHS patients.
45. NHS Foundation Trusts will have significant
additional financial freedoms, particularly the freedom to attract
revenue and capital proportionate to their performance. This means
that they will be able to borrow, from either private or public
lenders, based on their ability to repay. Each NHS Foundation
Trust will be free to borrow up to a prudential limit assessed
by the regulator based on the individual hospital's ability to
service the borrowing.
46. This approach is consistent with the
feedback from the consultation with the financial community in
developing the NHS Foundation Trust policy. Lenders are not looking
to take security over assets crucial to the provision of essential
public services. Instead NHS Foundation Trusts will borrow primarily
on the strength of their projected cash flows, not on assets.
The Prudential Borrowing Code will embody and codify this principle.
47. The Prudential Borrowing Code, will
be based on emerging best practice for setting prudential borrowing
regimes in other parts of the public sector, notably local authorities,
as well as informed by the ratings agency experience of not for
profit sectors in other countries. It will be made available to
second stage applicants and will be published by the Department
of Health. The Code will take into account all NHS Foundation
Trust debt and will allow NHS Foundation Trusts far greater discretion
over their capital raising decisions based on their ability to
manage the resulting financial commitments.
48. The intention is that each NHS Foundation
Trust will submit an application for prudential limit to the Independent
Regulator. The Regulator will confirm that this limit is consistent
with the guidelines set out in the Code, and will review each
limit on an annual basis. The NHS Foundation Trust will be able
to borrow up to the level of the prudential limit without reference
to the Independent Regulator or the Department of Health, subject
only to any scrutiny imposed by the financial institutions lending
to them.
49. NHS Foundation Trusts will be able to
retain year-end financial surpluses, to reinvest in health related
activity in the public interest. This means that they will be
able to use their surpluses to invest in developing new services.
50. This new system of regulation will give
NHS Foundation Trusts the freedom to manage and develop services
to suit local circumstances. They will be held to account for
the delivery of NHS services and the delivery of NHS standards,
with protection for NHS assets to ensure assets needed for continuity
of NHS care remain within the public sector.
LOCAL ACCOUNTABILITY
AND OWNERSHIP
51. The NHS belongs to the public but for
too long it has been run as a top down organisation from Whitehall,
accountable nationally not locally. The Government is committed
to ensuring that patients and the public are fully involved and
consulted about how local NHS services are planned, delivered
and how they can best be improved. A range of new measures has
been introduced to modernise the way the public is involved across
the NHS and ensure that patient and public voices are supported,
encouraged and, where necessary, enforced:
— the establishment of a Commission
for Patient and Public Involvement in Health;
— a duty on the NHS to involve and
consult their local community, set out in section 11 of the Health
and Social Care Act 2001; and
— new powers for local authority Overview
and Scrutiny Committees.
52. Within the principle of increasing public
involvement in the NHS there are different structures for different
organisations. The development of NHS Foundation Trusts, free
from national control, provides an opportunity to give patients
a greater say in how NHS services are provided by their local
hospitals, replacing Secretary of State accountability with local
ownership. As national control over day to day management decreases
so local community ownership is strengthened.
53. Local people and local staff will own
and control their NHS Foundation Trust, electing representatives
to a Board of Governors mandated to hold the management to account.
Their representatives will approve the appointment of the Chief
Executive and elect the Chair and non-executives. NHS Foundation
Trusts, with a legal structure devolved from Whitehall, provide
for a new model of social ownership with the local community owning
their local hospital and power devolved from Ministers to local
people, staff and community partners.
54. The governance arrangements for NHS
Foundation Trusts will ensure that patients, public and staff
are involved in decisions about the way care is delivered, in
deciding what services are provided, and in the strategic planning
of services. The Board of Governors will hold the management board
to account and ensure that it acts within its licence and statutory
duties.
55. The Board of Governors will be an integral
part of each NHS Foundation Trust, independent of other bodies,
representing patients, staff and partner organisations within
the organisation. The governance arrangements will enable patient
sand public to play a more effective part in running the NHS at
a local level.
56. A Guide to NHS Foundation Trusts
sets out a basic framework for governance within which each NHS
Foundation Trust will have the flexibility to develop local services,
to design the Board of Governors and to draft its constitution
to meet the needs of the local community. The aim is not to create
a one-size fits all NHS Foundation Trust but instead build flexibility
into the framework so that NHS Foundation Trusts and their local
communities can work together to develop the model that suits
their local priorities.
57. The framework recognises that the membership
community and partner organisations will vary from NHS Foundation
Trust to NHS Foundation Trusts. NHS Foundation Trusts may choose
to have separate representatives for different geographical areas,
or for different staff groups. Each NHS Foundation Trusts will
decide the size and structure of its Board of Governors to reflect
these local priorities.
58. This framework, to be set out in legislation,
is designed to allow each NHS Foundation Trust and each NHS Foundation
Trust applicant to meet their local circumstances and priorities
without central interference. But it will cover three basic requirements:
— as a minimum, eligibility for membership
must be open to members of the public, patients, employees and
representatives of partner organisations on the Board of Governors;
— patients, public and staff should
elect representatives to the Board of Governors; and
— these patient and public representatives
must form a majority on the Board of Governors.
59. The Board of Governors, once established,
will be responsible for:
— establishing mechanisms for consulting
the members or partner organisations they represent;
— holding at least one meeting each
year that is open to all the members to approve the annual report
and accounts of the NHS Foundation Trust and the appointment of
the auditor;
— meeting on no less than two other
occasions a year—when the main business will be to advise
the Management Board on the NHS Foundation Trust's forward plans;
— the election of the Chair and non-executive
members to the Management Board; and
— approval of the appointment of the
Chief Executive by the Chair and non-executive members of the
Management Board, and ratifying the appointment by the Chief Executive
of executive directors to the Management Board.
NEXT STEPS
60. Legislation will shortly be introduced
that will establish NHS Foundation Trusts and set up the framework
in which they will operate. In particular it will cover:
— establishment of NHS Foundation Trusts
as part of the NHS;
— creation of an Independent Regulator;
— basic framework on governance and
constitution;
— licensing arrangements; and
61. Following publication of A Guide
to NHS Foundation Trusts, applications have been invited from
current 3-star acute and specialist NHS Trusts to become NHS Foundation
Trusts. The application process has now begun and the closing
date for preliminary applications is 28 February 2003. In March
2003 the Department of Health will announce a shortlist of candidates
once the preliminary applications have been assessed.
CONCLUSION
62. NHS Foundation Trusts will operate to
provide NHS services to NHS patients according to NHS principles
and NHS standards. Their constitution will be based around a primary
purpose to provide health and related services for the benefit
of NHS patients and the community with a requirement to act in
accordance with NHS values. The NHS is more than its structure.
The strength of the NHS is in its values and ethos and NHS Foundation
Trusts will sit firmly within NHS values.
63. The Government welcomes the Health Select
Committee's inquiry and interest in the development of NHS Foundation
Trust policy.
Annex A
Seminar on NHS Foundation Trusts May 2002:
summary of European presentations
DANDERYD UNIVERSITY
HOSPITAL, STOCKHOLM,
SWEDEN
Background
— A publicly owned corporation (the
County Council owns all shares) which operates on a not-for-profit
basis. Capital assets such as plant and specialist equipment were
transferred to its ownership but land and buildings were retained
by another public company within the County Council.
— Hospital is paid by performance under
a points system.
— Low waiting times over 2001 eg 13
days from diagnosis to treatment from breast cancer. For hip replacements
it is typically eight weeks between referral to outpatient appointment
and then a further five weeks to inpatient appointment.
— Solid performance data is supplemented
by regular patient and staff surveys.
Governance arrangements
— The Board is appointed by the owners
(ie the County Council) and is accountable to the owners alone.
— Board membership includes key staff
groups, union representative and Universities but no politicians.
Management Freedoms
Has responsibility for:
— Pay levels and staff contracts.
— Investment within the constraints
of its budget (approximately £3.5 million per annum).
— Placement of capital (approximately
£10 million per annum).
But:
— Restrictions on borrowing have meant,
in practice, that freedom around investment does not go far enough
to allow Danderyd to build a new wing for the hospital or build
a new operating theatre. They can apply for loans but are obliged
to apply to the County Council.
Support and Intervention
— No formal supports or interventions
if things go wrong. No rewards when the hospital is doing well.
— Patchy regime of inspection and monitoring.
Success Factors
Suggested factors to ensure success include:
(a) Willingness to change the culture at
all levels and readiness to take organisational risks.
(b) Feedback/monitoring system in order to
identify problems early.
(c) Educating purchasers so they know what
to buy.
(d) Concentration on results, not volume.
Risks
That modernisation of purchasing lags behind
development of provider services. In Sweden, failure to address
this issue has resulted in failure to provide the right incentive
to maximise quality of care and over-concentration on volumes.
INSALUD, MADRID,
SPAIN
There are several different models of healthcare
operating in Spain reflecting the decentralised system of healthcare
provision and the significant influence of the regional health
ministries.
The traditional, administrative system is a
"rigid bureaucracy" in which organisations are constrained
by state regulations, a historical funding formula, state ownership
of capital, and an HR framework for state employees that is fixed
at the national level with no link between salaries and performance.
There are at least five not-for-profit "foundation"
hospitals that have been established outside of the administrative
system in Spain. These are Hospital Alcorcn (Madrid), Hospital
Manacor (Balearic Islands), Hospital Calahorra (La Rioja) and
Hospital Son Llatzer (Balearic Islands).
These share some of the following characteristics:
— Distinct legal identity.
— Employ own staff (ie staff not civil-servants
as is the case with the "administrative model").
— Negotiate their own HR framework
and implement cash incentives.
— Payment by results as opposed to
funding through a historical budget.
— Negotiate legally binding contracts
for provision of services.
— Freedom to establish their own recruitment
strategies and buy in the latest technologies. Greater autonomy
allowed the new hospitals to pay their staff better, be more efficient
and improve safety records.
Major reform and service improvement has largely
been achieved by new hospital developments that have arisen outside
of the main administrative system. By contrast, traditional hospitals
that have converted into Public Health Foundations within the
administrative system have largely failed as a result of that
system's restrictive framework.
Other points were:
— Public support is of vital importance.
In Spain, many people viewed the advent of new hospital developments
as privatisation of healthcare and a violation of the core principles
of a public health service. Even though these hospitals have remained
publicly owned the use of private sector management has allowed
anti-reformists to galvanise opposition particularly among the
unions and professional bodies.
— New hospital developments are more
efficient, and have a superior safety record.
The central conclusion from the experience of
implementing change in the Spanish system is that a culture change
is equally important as structural change. Lack of public support
for reform and accusations of "privitisation" have stifled
innovation.
PUBLICLY OWNED
FOUNDATIONS IN
SPAIN
Backgound
Funding is secured through a system of annual
allocation (based on relevant population size) with top-up payments
for additional activity (using, primarily, DRGs).
Foundation Hospitals are subjected to a variety
of audit and regulatory measures which include: inspection by
the Government's inspectorate; special reports commissioned by
Parliament; external audit (commissioned by the organisations
themselves); and, investigation by Government and/or Parliamentary
auditors.
Governance
Typical Board composition includes significant
political representation ie the Regional Minister for Health usually
holds the position of Chair (who subsequently appoints other Board
members) and the local Mayor is often included as a member to
provide community representation.
Other members are often drawn from the regional
health authority (purchasers) and other stakeholder groups such
as universities. Trade unions are not normally represented and
patient involvement is via a supporting committee rather than
direct Board representation.
Management Freedom
The system offers flexibility and management
based on results, giving the hospitals flexibility to:
— Recruit personnel based on hospital
needs.
— Change organisational structure when
necessary.
— Set salaries levels and other conditions
for staff.
— Set departmental budgets.
— Decide on capital expenditure, with
the proviso that all profits are reincorporated into the hospital.
Contracting
The relationship between purchaser and provider
is formalised under a contractual arrangement made up of two principal
components. The first part is the Framework Contract which sets
out purchaser/provider relationship, system of finance, standards
of service and penalties. The second part is the Annual Contract
that builds on the Framework Contract by specifying activity levels,
tariffs, other objectives (eg quality, special projects, patient
satisfaction, etc).
Consequences of Change
— Hospital foundations have increased
their research activities to secure additional income.
— Information technology is used intensively
to improve communication and efficiency.
— Pressure to maintain credibility
and public confidence has resulted in development of performance
indicators, widespread use of patient surveys and need to external
accreditation.
— Clinical leadership is vital to bringing
about success within new hospital developments.
Challenges
It is necessary to modernise the framework in
which Foundation Trusts are to operate if they are to fulfil their
potential. In Spain, new hospital developments have been forced
to operate within the traditional framework, which contains numerous
inertial factors that are an obstacle to change.
COPENHAGEN HOSPITAL
CORPORATION
Background
— Hospitals in the Copenhagen metropolitan
district are part of a publicly owned corporation which owns and
controls all of the assets.
— Funded through taxes levied at national,
county and municipal level. Funding for local services is a combination
of funds generated through county and municipal taxes supplemented
by a block grant from the Government.
— The Copenhagen and Frederiksberg
municipal authorities provide funding for a fixed level of services
and the Corporation receives 10% of DRG value for any additional
activity. Other County authorities in Denmark will pay 100% of
DRG for the majority of their patients and a cost dependent price
for highly specialised patients.
— Danish Government's role is to influence
the system by setting goals, service targets and guarantees for
patients and staff.
— two months for elective surgery;
— six weeks for cancer diagnosis,
surgery and radiotherapy/chemotherapy to take place.
— Cost of healthcare in this hospital
increased initially but is now just below Danish average per capita.
Governance
— The Corporation is governed by a
political authority known as the Council. Members are drawn from
two municipal authorities as well as state officials and nominated
for a four-year tenure.
— The Council lays down objectives,
framework and general principles.
— Appoints the three members of the
Board who are then invited to set the agenda for and attend all
council meetings.
— Staff involvement in the management
of the Corporation is facilitated through a committee system that
operates at Corporation, hospital and department level.
Management Freedom
The new-model hospitals have the freedom to:
(i) Negotiate pay awards and staff contracts;
(ii) Decide on a price for services to private
patients; and
(iii) Borrow finance, provided the loan is
approved by the Government (however, legislation prohibits the
re-investment of surpluses).
| 
