Annex A - Background to Foundation Trusts
What are foundation trusts?
In 2003 the UK Parliament passed the Health and Social
Care Act to create a new type of organisation transforming English
NHS trusts into foundation trusts (FTs). FTs are independent not-for-profit
public benefit corporations. They are required to meet national
targets, like any other trust, but have more freedom to decide
how they achieve these standards. There are currently 107 foundation
trusts in the English NHS, mostly acute facilities and, more recently,
including some mental health units. Foundation status is granted
to high performing trusts after successfully completing an application
process administered by Monitor, the independent regulator of
foundation trusts.
The Government's original aim was that all NHS trusts
would eventually become foundation trusts. However in late 2007,
the DH recognised that some trusts would not reach the standard
necessary to achieve FT status and that the target of all trusts
having the opportunity to become FTs by 2008 would not be achieved.
The DH now intends that, over the next three years, all acute
and mental health services will be delivered by FTs, with the
implication that FTs will merge with or buy out the remaining
non-foundation hospitals. The following table shows how the proportion
of acute and specialist trusts which have been granted foundation
status has increased.
The number of FTs is increasing, but the aspiration to have 100 FTs
by December 2007 was not met
Note: 2008/09 figures correct at time of publication
(June 2008). Data excludes mental health trusts
Source: Audit Commission and Healthcare Commission
Geographical distribution of FTs is shown at Annex
C.
Foundation trusts differ from NHS Trusts is three
key respects:
- Local accountability—as
well as Boards of Directors, FTs have Boards of Governors, and
members, drawn from staff and the local public, who participate
in elections for boards of governors.
- Freedom from central control—FTs are not
directly accountable to the Secretary of State, but instead to
an independent regulator, Monitor.
- Financial freedoms; FTs:
- have greater financial flexibility:
FTs do not have to break even and are allowed to retain surpluses
- can invest in buildings and new services
- can manage their own assets
- can borrow both from the public and the private
sector
- can recruit and reward staff with more competitive
salaries
Foundation trusts have been introduced against a
backdrop of system-wide reforms to the NHS including Payment by
Results, patient choice and the introduction of Independent Sector
Treatment Centres, all of which have been introduced as incentives
to improve the quality and efficiency of secondary care. At the
same time a desire to shift more traditionally secondary care
services into primary care settings closer to people's homes was
expressed in the Our Health, Our Care, Our Say White Paper,
and this has been underpinned by the introduction of practice-based
commissioning, alternative primary care providers, and the consideration
of other models of primary-secondary care services delivery such
as polyclinics. At the same time the period during which foundation
trusts have been operating has also seen the NHS as a whole slide
into and recover from major financial deficit, and a wholesale
restructuring of PCTs, which are the organisations responsible
for commissioning care from FTs and other providers.
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