Memorandum submitted by Monitor (H&SC 12)


Monitor's submission to the Public Bill Committee on the Health and Social Care Bill




Monitor, the Independent Regulator for NHS Foundation Trusts is responsible for ensuring that NHS foundation trusts are efficient, effective and economical. As such Monitor's remit covers all aspects of NHS foundation trust performance, clinical or financial.


The regime for NHS foundation trusts has proven its effectiveness. NHS foundation trusts are rated more highly by the Healthcare Commission for the quality of their services than NHS trusts. Furthermore Monitor's compliance regime has proven capable of early identification of performance issues, and secured the correction of both service and financial failures.


The success of the NHS foundation trust regulatory regime is largely due to:


a clear statement of the NHS foundation trust's responsibilities in its Terms of Authorisation (ToA). These include both financial requirements (to operate as a going concern) and governance requirements (including the requirement to meet national targets and core standards and to provide mandatory services). The ToA also provide a proven basis for regulatory intervention if required;


a clear, single line of accountability for the NHS foundation trust board to Monitor for delivering the requirements in the ToA, backed by a credible threat of intervention. The regime takes full advantage of the Healthcare Commission's expertise in assessing clinical quality but responsibility for intervention lies solely with Monitor ensuring accountabilities remain clear.


The creation of a new regulator, the Care Quality Commission, with statutory powers over NHS foundation trusts puts this success at risk. Giving two regulators powers of intervention over the same bodies risks confusion, duplication and loss of accountability.


To preserve the clear accountability arrangements of NHS foundation trusts, and the success of the regulatory regime we need to retain a single point of intervention, through Monitor, backed up the expertise of the Care Quality Commission.


To achieve this, the bill would need to be amended to require Monitor to ensure, by intervention if necessary, that NHS foundation trusts meet the registration standards and correct any failings identified by the Care Quality Commission. If the NHS foundation trust is unable to meet these requirements Monitor should then refer the trust to the Care Quality Commission for removal of its registration.



The regulatory regime for NHS foundation trusts


1. NHS foundation trusts were established as autonomous bodies within the public sector, with the aim of improving healthcare. NHS foundation trusts play an increasingly important role in the delivery of healthcare in England. One in three acute trusts and one in four mental health trusts has already achieved foundation trust status.


2. NHS foundation trusts have greater freedoms over their finances and operations than NHS trusts, providing greater opportunities to improve healthcare.


3. Alongside these freedoms NHS foundation trusts have new accountability arrangements. At a local level they are accountable to local people and their staff through their members and governors. NHS foundation trusts are also accountable nationally to Parliament and to Monitor, the Independent Regulator of NHS Foundation Trusts. Monitor is charged with ensuring that NHS foundation trusts are efficient, effective and economical and to operate a number of controls designed to safeguard the interests of the taxpayer.


4. The regulatory framework Monitor has put in place over the last 3 years has clearly contributed to the success of NHS foundation trusts. Our aim is to operate a regime that incentivises NHS foundation trusts to be professionally managed and financially strong.


5. To achieve foundation trust status an applicant trusts must be authorised by Monitor. Monitor's authorisation process for NHS foundation trusts is a rigorous assessment of the financial stability and effective governance of the applicant trust. Monitor has chosen to operate a high standard for authorisation. Maintaining this high standard continues to be important in maintaining the credibility of the NHS foundation trust policy.


6. Once an NHS foundation trust has been authorised Monitor's compliance regime seeks to ensure ongoing compliance with the Terms of Authorisation. To ensure our information requirements are proportional we have developed a risk based approach where the intensity of monitoring is determined by the risk of a significant breach of the Terms of Authorisation, and we intervene only were necessary.


7. The Terms of Authorisation set out a clear statement of the responsibilities and requirements placed on an NHS foundation trust, including:


to operate efficiently, effectively and economically

to remain a going concern

to put in place processes for monitoring and improving quality

to comply with standards and targets published by the Secretary of State

to continue to provide mandatory services

to protect property needed to deliver mandatory services

to limit borrowing as determined by the Prudential Borrowing Code

to provide information to third parties

to co-operate with other NHS bodies, Local Authorities and other regulatory bodies such as the Healthcare Commission

to notify Monitor of any failure or anticipated prospect of failure to meet the Terms of Authorisation



8. Where there is a significant breach of the Terms of Authorisation, Monitor has wide discretionary powers of intervention. We can require an NHS foundation trusts to seek external advice and support, to take (or not take) specified actions, require changes in clinical practice or the cessation of specified services, and/or remove some or all of the members of the Board.


9. The requirements to meet national standards and targets and monitor and improve quality are a significant element in the Terms of Authorisation. We have developed a detailed approach to ensuring compliance with these elements of the Authorisation working closely with the Healthcare Commission. Last year we published Developing the Compliance Framework: Clinical Quality and Service Performance which set out in detail our approach to these issues, working with the Healthcare Commission and other expert partners to secure advice, and how and when we should intervene. For example we have worked successfully with the Healthcare Commission on specific investigations of clinical performance, The Health Protection Agency and the Department of Health on Healthcare Associated Infections and independent auditors on waiting time management. We believe this has provided a robust regime for assuring quality in NHS foundation trusts and should form the basis of the regime going forward.



The regulatory regime for NHS foundation trusts has proved successful


10. The evidence for the success of the regulatory regime for NHS foundation trusts can be seen in the performance of NHS foundation trusts and the success of Monitor's interventions where they have been required.


11. NHS foundation trusts perform better than NHS trusts. In 2007 the Healthcare Commission rated 74% of NHS foundation trusts as "excellent" or "good" for the quality of their services compared with 57% of NHS trusts. NHS foundation trusts are also delivering strong financial performance. By the end of the second quarter of 2007-08, 73 NHS foundation trusts had generated an aggregate surplus of 210 million (after public dividend capital and before exceptional items) with 72 of 73 NHS foundation trusts achieving a surplus in this period. NHS foundation trusts are well placed to utilise their financial strength and re-invest in patient service to further improve performance.


12. Where there have been concerns with NHS foundation trust performance, Monitor's compliance regime has identified these early and ensured that the NHS foundation trust takes the necessary action to correct the failings.


13. Monitor has only used its formal powers once (in response to serious financial failings in Bradford Teaching Hospitals NHS Foundation Trust) but our compliance regime has rectified serious deficiencies in both service and financial performance in a number of other NHS foundation trusts. We can influence NHS foundation trust boards to bring about change without using our formal powers, as the accountabilities are clear and the threat of intervention is credible.


14. The financial turnaround at University College London Hospitals NHS Foundation Trust, which will turn a deficit of 36m in 2005-06 into a surplus in 2007-08, is a good example of the regime's effectiveness in tackling financial failure.


15. Our ability to rectify deficiencies in service or clinical quality in foundation trusts may not be as well known as our work on financial problems, but is no less rapid or effective. For example, in 2006 and 2007 we have:-


required Moorfields to remedy breaches of the 17 week out patient target, and to put right the serious system failures discovered in the process.


worked with James Paget to ensure fast and effective action to tackle a major C-Diff outbreak. The resulting best practice guide produced by the foundation trust has been strongly endorsed by the SHA


16. The regulatory regime for NHS foundation trusts works because:


there is a clear statement of the NHS foundation trust's responsibilities in its Terms of Authorisation (ToA). These include both financial requirements (to operate as a going concern) and governance requirements (including the requirement to meet national targets and core standards, to provide mandatory services);


it is transparent and principles based. This removes uncertainty and makes the regime more predictable. This is important in supplying nationally consistent messages to NHS foundation trust boards, and in ensuring that the process is not susceptible to political pressure from MPs or Ministers;


there is clear accountability for NHS foundation trust Boards to Monitor, backed up by effective powers of intervention:


Monitor has the skills to hold Boards to account effectively. Issues are confronted early, expert specialist monitoring and interpretation leaves little room for obfuscation and Boards know that we will intervene if necessary;


the regime is proportionate and rationale. Risk ratings determine the level of intervention allowing our normal approach to be light touch. Intervention, where necessary, is on objective grounds.




Monitor continues to be concerned over the implementation of the new regime based around the Care Standards Commission


17. We are concerned that the introduction of a new statutory regulator with powers of intervention over NHS foundation trusts puts at risk the clear accountability arrangements that are in place for NHS foundation trusts. Rather than being clearly accountable to Monitor for their overall performance, NHS foundation trusts will be accountable to two regulators, and face the double jeopardy of both regulators intervening.


18. We no not believe this is a satisfactory arrangement. It risks failing trusts engaging Monitor and the Care Quality Commission in three way discussions at the point of failure, leading to delay and potentially playing one regulator off against another.


19. We believe that particular attention should be paid to these risks as there are no off setting benefits for the regulation of NHS foundation trusts. Monitor already requires NHS foundation trusts to meet national standards, and could do so for any new registration requirements. Monitor has the necessary enforcement powers to ensure compliance. The new requirement to register with the Care Quality Commission will not provide any new safeguard, rather it will duplicate Monitor's existing arrangements for NHS foundation trusts.



Clear responsibilities on intervention are required in the bill


20. The proposed arrangements can be made to work if there is absolute clarity over the responsibilities for intervention in NHS foundation trusts, preserving the clear accountabilities that currently exist for NHS foundation trusts.


21. Our preferred approach would be to carry forward the current system for regulating NHS foundation trusts. This would see the Care Quality Commission establishing the criteria for, and assessing performance against registration standards. Where the Care Quality Commission identified failings it would publish its findings and make recommendations to the NHS foundation trust and Monitor. Any further enforcement action would be left to Monitor. Such an approach would take full advantage of the skills and expertise of the Care Quality Commission while leaving Monitor as the single point of intervention for NHS foundation trusts, and preserving the clearest lines of accountability.


22. If an NHS foundation trusts is unable to meet the required standards, and Monitor takes the view that further exercise of its intervention powers would not secure the necessary improvements, then Monitor would refer the NHS foundation trusts to the Care Quality Commission for it to consider removing the registration of the NHS foundation trust.


23. Such an approach would meet the concerns for a level playing field by ensuring that NHS foundation trusts were required to meet the same standards, as assessed by the same body - the Care Quality Commission - as all other providers. But crucially it do so without putting at risk the clear accountability of NHS foundation trusts to Monitor, and the success of the existing regime for NHS foundation trusts.


24. While we accept that other approaches could be made to work, it is our view that clear legal responsibilities for the two statutory regulators will be crucial to any successful regime. Our preferred approach has the advantage of providing a clear, straightforward approach, built on the success of the existing model.


January 2008