APPENDIX 11
Joint memorandum by Diane Dawson and Maria
Goddard (FT18)
1. It is too early to offer any views based
on research evidence because government policy on the issue of
Foundation Trusts has only very recently been published (December
2002). Thus our note focuses on some of the potential issues that
we believe may arise as policy is implemented.
2. We offer our views on two points: first,
the apparent tension between the nature of the freedoms and benefits
to be enjoyed by Foundation Trusts and the constraints within
which they will be required to operate; and second, the parallel
systems of regulation to be introduced for Foundation and non-Foundation
Trusts.
3. Whilst it is clear that the new governance
arrangements may offer benefits for local communities and commissioners
if they give stakeholders a greater chance to influence the provision
of services, the decision seek Foundation status will rest with
the hospital itself. The incentive to take up this option hinges
on perceived benefits to the hospital and its staff, rather than
any wider benefits to the local community. However, although the
policy gives specific freedoms to Foundation Trusts, the apparent
need to demonstrate that a two-tier system will not be created
also places several constraints on the hospitals that may in effect
cancel out the freedoms and hence dilute the incentive to seek
or to retain Foundation status.
4. One example of this arises in relation
to the provision of "regulated services". If it is the
case that these constitute all clinical services provided to NHS
patients then a Foundation Trust appears to be subject to the
same—or perhaps even more—constraints on the nature
of provision of these services than any other hospital. If any
"substantial" changes are required in these services
the Trust has to consult and involve the PCT and general public,
then consult the local Overview and Scrutiny Committee and then
inform the Independent Regulator. Similarly, they are not to be
allowed to increase service provision to private purchasers. It
is hard to see how this gives clinicians and managers freedom
(ie "so that people who know best what needs to be done can
take action without going through a complex bureaucratic process";
para 1.9) or provides "greater diversity of provision and
choice for patients" (para 1.9).
5. The definition of "regulated services"
will be critical to the performance of the new system. It is unclear
whether all clinical services to NHS patients will be defined
as regulated services or whether this will apply only to a smaller
set of core services. For example, when the internal market was
introduced, Accident and Emergency services were defined as a
core aspect of provision and were "protected" from the
operation of the market by rules requiring block contracts to
be set. The scope of regulated services will have an important
impact on the freedoms for Foundation Trusts. For example, could
they enter into a joint venture with a privately owned Diagnostic
and Treatment Centre (DTC)? If so, the assets for providing the
elective services would be owned by the DTC. Would these assets
cease to be regulated assets? If regulated services include elective
care as well as emergency care, then Foundation Trusts will not
be able to enter into such agreements.
6. Foundations Trusts are to be free to
develop their own recruitment and retention policies. However,
they are "expected to use these freedoms in a way that does
not undermine the ability of other providers in the local health
economy to meet their NHS obligations" (para 1.37). Presumably,
this is to avoid Foundation Trusts luring staff away from other
hospitals with better pay and employment conditions. However,
in a labour market where demand exceeds supply, it is not clear
how they can benefit from their apparent freedoms if they are
not allowed to do this. In order to retain their three star rating,
managers of Foundation Trusts would surely wish to use their freedoms
in order to ensure their staffing levels were adequate. In practice,
it is difficult to know how this is to be enforced anyway as it
requires an interpretation of what actions constitute an attempt
to "undermine" other providers—if staff leave
a non-Foundation Trust to work at a Foundation Trust, how is this
to be interpreted?
7. Of course, there must be a balance between
freedom and accountability in a publicly funded system which aims
to provide some degree of equity of access and provision geographically.
However, it seems that many of the incentives that arise from
the freedoms to be granted to Foundation Trusts may actually be
more valuable to the local community and to commissioners than
to the hospital itself. If the freedoms that are granted to hospitals
are in practice then offset by corresponding constraints, it is
difficult to see what incentives—aside from the initial
prestige value—will exist to tempt hospitals to take up
(or more importantly, to retain) the challenge of being a Foundation
Trust.
8. The second area on which we would like
to comment concerns the regulatory system to be put in place for
Foundation Trusts. The Independent Regulator is to have many of
the powers of the Secretary of State to intervene in Trusts with
relatively poor performance, including the power to transfer assets
from failing Foundation Trusts to other Trusts.
9. Should a Foundation Trust receive an
adverse report from the Commission for Health Audit and Inspection
(CHAI) or fail to maintain a three star performance rating, the
Independent Regulator can impose additional reporting requirements
or use other measures to intervene in the hospital's affairs.
It is difficult to see how the form of intervention is likely
to differ from what presently occurs when a non-Foundation Trust
receives an adverse CHAI report or low star rating. If CHAI reports
adversely on, say paediatric surgery in a Foundation Trust, is
the Independent Regulator expected to have the in house expertise
to help the Trust deal with its problems? Consider two Trusts,
one a Foundation Trust and another a non-Foundation Trust, both
having adverse CHAI reports focused on, say, paediatric surgery
and A&E. The Independent regulator deals with the Foundation
Trust, the Department of Health with the non-Foundation Trust.
It is not obvious that the instruments or skills required for
effective intervention will be different. What is the advantage
of two separate regulators undertaking the same tasks?
10. In the past year it has been recognised
that having separate regulators for public sector and private
sector health care is inefficient. The new Commission for Health
Audit and Inspection creates a single regulator for all organisations,
public or private, delivering health care to NHS patients. It
is important to understand why it is now considered desirable
to have parallel but separate regulators for hospitals with identical
health care delivery requirements.
11. The role of the Independent Regulator
relative to other NHS regulators and planners is unclear. Will
the Independent Regulator be expected to operate within the labour
market framework produced by Workforce Development Confederations
when assessing whether a Foundation Trust is operating in the
public interest? Will the role of Strategic Health Authorities
in co-ordinating plans for development of new capacity and geographic
equity be treated as relevant to the Independent Regulator when
considering the development plans of a Foundation Trust?
Questions it may be useful for the Committee
to explore with witnesses:
— Is it correct that regulated services
(and assets) include all clinical services currently provided
by a Trust or is it expected that regulated services may be identified
as a smaller core of Trust activity?
— At present there is an active labour
market in the NHS with doctors, nurses and technicians changing
jobs. What criteria may be used to identify whether a Foundation
Trust employment policy is "undermining" other NHS providers
as opposed to facilitating the normal employment transfers observed
within the NHS?
— Can the Department of Health specify
or give examples of the "existing controls" exercised
by the Secretary of State that will no longer apply to Foundation
Trusts? It is important to distinguish between powers of the Secretary
of State transferred to the Independent Regulator and controls
operating at the Trust level. How will the new freedoms of Foundation
Trusts differ from those accorded to NHS Trusts granted "earned
autonomy"?
— In what respects will the powers
of the Independent Regulator to intervene in a failing Trust's
affairs differ from the powers of the Department of Health to
intervene?
— What are the advantages of having
separate regulators for Foundation and non-Foundation Trusts?
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