Health and Social Care Bill

Memorandum submitted by the Foundation Trust Network (HS 16)

1. Introduction

1.1 NHS foundation trusts were established to be autonomous public healthcare providers. In 2004, just seven years ago, 20 foundation trusts were authorised. Now there are now 134 FTs in the acute and mental health sectors, with trusts in ambulance and community services awaiting authorisation as foundation trusts.

1.2 Foundation trusts have 1.8 million members, made up of patients, service users, and members of the public, with 4,200 governors, elected by patients and the local community, or representing local organisations. Foundation trusts herald a new era of local engagement and accountability in the NHS.

1.3 This briefing sets out what the measures in the health bill mean for NHS foundation trusts.

2. Key messages

2.1.1 The radical reforms outlined in the health and social care bill endorse the success of the foundation trust model and means that all public providers will become foundation trusts.

2.1.2 The proposals complete the foundation trust journey started seven years ago. The bill will enable foundation trusts to realise the value they can bring to the NHS, developing as autonomous, responsive and accountable bodies working in partnership with other organisations, to deliver health and care for local people.

2.1.3 The FTN welcomes the new freedoms for foundation trusts. We have lobbied hard for the streamlining of the mergers and acquisitions process and for the lifting of the prudential borrowing code. These freedoms are balanced by greater accountability, with a strengthened role for foundation trust governors in holding FT boards to account, and approving significant mergers or acquisitions or other transactions.

2.1.4 In particular we welcome the lifting of the private patient income cap that will enable foundation trusts to bring much needed additional resources to benefit NHS patients and service users.

2.1.5 As the reforms are implemented, foundation trusts will be the only truly stable part of the NHS. The FTN shares some of the anxieties voiced about instabilities that might arise, and we want to see risks in the system properly managed to ensure that an efficient FT sector remains sustainable during the transition period.

3. Transition and implementation issues

3.1 In terms of handling the transition and implementation of the bill’s proposals, there are a number of issues that need to be tackled:

3.2.1 Establishing clear rules over potential GP commissioner conflicts of interest

3.2.2 Mitigating the level of risk that service providers are carrying during the transition period

3.2.3 Building stability through a smooth transfer of existing contracts between PCTs and new GP Commissioners

4. The health and social care bill and the key issues for NHS foundation trusts

4.1 This evidence submission provides commentary on those parts of the bill which have an impact on the foundation trust sector, its operation, development and sustainability.

4.2 Overview of the bill

4.2.1 System autonomy

The original plans for NHS foundation trusts envisaged them as autonomous public healthcare providers, fully part of the NHS. The duty for the Secretary of State for Health in this bill to promote autonomy is a prerequisite to helping ensure that this aspiration is fully realised and sustained.

4.2.2 Market and regulation

The bill moves to a fully regulated market in health and social care, creating a new economic regulator.

4.2.3 Governance and freedoms

NHS foundation trusts have been granted further freedoms, which will enable them to realise their potential and bring real value into the NHS. Alongside these freedoms, foundation trust governors are given greater powers, ensuring that FTs are even more accountable to patients, public, communities, local stakeholders and local taxpayers.

4.2.4 Local engagement

Local Healthwatch organisations will be established to replace the current LINks structure (aiming to ensure local involvement in health). Also local health and wellbeing boards will be established; these will seek to provide a line of democratic accountability on commissioning issues. Currently these provisions do not appear to recognise the role of foundation trust governors and their potential contribution.

5. Part 1 – The Health Service in England

5.1 This part of the bill sets out duties for the Secretary of State to promote autonomy. It also gives them the power to intervene should the economic regulator, Monitor, fail in its duties.

5.1.2 FTN view

The FTN welcomes the duties to promote autonomy. However it is critical that the criteria upon which this power is based are set out in regulations, so that the process is transparent and to ensure that this would only happen in extreme circumstances

6. Part 3 – Economic regulation of health and adult social care services

6.1 Monitor – Chapter 1

6.1.1 This part of the bill establishes Monitor as a new regulator of all health and adult social care providers, with its main duty to protect and promote healthcare service users’ interests by promoting competition where appropriate and regulating if necessary. It must avoid a conflict of interest between its role as interim regulator of foundation trusts and its new duties.

6.1.2 FTN view

The FTN welcomes the reference on the face of the bill and associated measures to avoid the conflict of interest between Monitor’s role as FTs’ regulator and its new duties. We have argued that the continuation of both roles represents a conflict.

6.2 Competition – Chapter 2
6.2.1 This chapter gives Monitor competition powers concurrent with the Office of Fair Trading. The bill highlights the fact that the NHS Commissioning Board and GP consortia must meet requirements relating to good practice in procurement, patient choice and promoting competition.

6.2.2 FTN view
The detail of these requirements will be set out in regulations. The measures relating to procurement must be able to prevent anti-competitive behaviour such as inappropriate ‘self-supply’.

6.3 Designated services
6.3.1 Commissioners will apply to Monitor for the designation of services. If they propose removing a service (without available alternatives) they will have to consider if its removal will have a significant adverse impact on patients’ health now, or in the future. They must consult councils, local Healthwatch and the service provider. Providers can appeal against the designations. The NHS Commissioning Board must ensure that commissioners agree on designations. If they cannot then it will make the decision itself.

6.3.2 FTN view
The FTN wants clarity on the designation of protected services. The bill, as currently drafted, appears to suggest that designation will not have a set timeframe. This means it will remain so until reviewed or appealed by the commissioner, unless the provider itself appeals within 28 days. There is insufficient flexibility in this arrangement for the reconfigurations that will be necessary for providers to mitigate risk and avoid failure.

6.4 Licensing
6.4.1 This chapter proposes that NHS healthcare providers must be licensed, and that Monitor will set the criteria for and grant licences. Monitor will hold and publish the register of licences. It will determine the licence conditions which will be a mixture of standard conditions and special conditions. Special conditions can cover issues such as price, choice and competition. Monitor will have the power to modify licence conditions, and providers will be able to object. If a sufficient proportion object, the modifications can be blocked.

6.4.2 Monitor will retain the power to designate foundation trusts and maintain the compliance regime for two years after the start of licensing.

6.4.3 FTN view
On Monitor’s retained power with relation to foundation trusts, the FTN welcomes the time-limited nature of this power, and believes that two years is sufficient. We have argued that an open-ended continuation of Monitor’s role as economic regulator and FT regulator represents a conflict of interest.

6.5 Pricing
6.5.1 The bill provides for Monitor’s role in price-setting: determining currencies, the methodology and the prices, as well as establishing rules around local variation. Monitor will be able to set different prices for designated services, which must be agreed in advance with the Commissioning Board. There will be 28 days consultation in which organisations can object to the methodology used, but not the price. If a sufficient proportion objects then Monitor will have to review the tariff or refer it to the Competition Commission. Both commissioners and providers can appeal. The bill appears to suggest that the Competition Commission itself can make adjustments to the methodology. Monitor’s prices would apply until the end of the investigation and then it would have to re-set prices in response to any inaccuracies in methodology upheld.

6.5.2 FTN view
We have concerns about price competition in relation to sustaining quality in the NHS. Monitor will need to take a very careful approach to this. In addition, the FTN will be seeking clarity on the role of the Competition Commission in price setting.

6.6 Insolvency, special administration and financial assistance

6.6.1 In these chapters the bill provides for the application of insolvency law to NHS foundation trusts. Monitor will be able to apply for a health special administrator order so that the court can appoint an administrator to continue providing designated services until the situation is resolved. Monitor must establish the mechanisms for providing financial help for special administration, covering how money is raised (for example a risk pool arrangement) or ensuring providers arrange insurance facilities.

7 Part 4 – NHS foundation trusts and NHS trusts

7.1 Governance and management

7.1.2 There are new duties and powers for foundation trust governors, boards of directors and members. Governors will have new duties to hold the non-executive directors to account for the performance of the FT board of directors, and to represent the interests of FT members and the public. The FT must also ensure governors have the right skills and knowledge to carry out their role.

7.1.3 FT directors’ duties are amended to bring them into line with director duties in company law, and they have a general duty to promote the success of corporation to maximise benefits for the members of the corporation and the public as a whole.

7.1.4 FTN view

The new duties for governors represent a sensible strengthening of governors’ powers, to ensure that there is an effective line of accountability from the FT to its members who are patients, services users, their carers and families, as well as members of the public. Governors should act as the local proxy for the public’s interest in the FT’s services and assets as tax payers and citizens. The proposals in the bill demand more from FT governors. They will need effective training and skills development to do this. The FTN is working with the Department of Health and other training providers to devise a programme to support governor development.

7.2 Finance

7.2.1 This clause removes the limit on foundation trusts’ ability to borrow, and also paves the way for the establishment of an operationally independent financing facility for foundation trusts.

7.2.2 FTN view

The FTN welcomes the removal of the borrowing limits. This is a freedom that FTs have been calling for. The establishment of financing facility is also welcome but we will be seeking reassurance during the passage of the bill that independence is properly built in to any arrangement that develops, and that the system is rules-based. Ideally the financing facility would be established as an arms-length body.

7.3 Functions

7.3.1 The bill provides for the removal of the private patient income cap. Significant transactions, which must be described in an FT’s constitution and which need a vote of more than 50% of the council of governors.

7.3.2 FTN view

The FTN fully supports the removal of the private patient income cap. This cap, which has applied only to NHS foundation trusts (not NHS trusts), has limited the amount of money that FTs can derive from non-NHS sources. The removal of the cap will enable FTs to bring in much-needed additional resource to benefit NHS patients and service users. This is a welcome new freedom for foundation trusts.

7.4 Mergers, acquisitions, separations and dissolutions

7.4.1 These clauses will streamline transactions procedure for foundation trusts, including removing the need for existing FTs to reapply for FT status in the case of a merger or acquisition. Any of these transactions will need a vote of more than 50% of council of governors.

7.4.2 FTN view

The FTN believes that these proposals will give FTs welcome operating freedoms. However as well as removing the legislative and bureaucratic barriers to transactions, there needs to be political will behind provider reconfiguration proposals if they are to be successful.

7.5 Abolition of NHS trusts

7.5.1 These clauses specify that 1 April 2014 is the date by which all NHS trusts must have become NHS foundation trusts in their own right, or to have become part of another organisation.

7.5.2 FTN view

The FTN strongly supports the cut off date for foundation trust status. 1 April 2014 is a challenging target date, but it does provide the momentum and focus of attention necessary to ensure that system reforms can be implemented. The FTN works very closely with those NHS trusts seeking FT status, and will continue to provide our tailored programme of support.

8. Part 5 – Public involvement and local government

8.1.1 This part of the bill establishes two new structures: Healthwatch England and Local Health and Wellbeing Boards.

8.1.2 Healthwatch England and local Healthwatch organisations (clauses 166 – 174)

These clauses abolish the Local Involvement Networks (which were established by the Local Government and Public Involvement in Health Act 2007) and absorbs their functions into a new organisation – Healthwatch. Responsibility for Healthwatch England will sit with the Care Quality Commission, and issues raised by local Healthwatch organisations can be escalated to Healthwatch England. The responsibility for commissioning the network of local Healthwatch organisations will remain with local councils.

8.1.3 FTN view

Over the past decade there have been a number of changes to local involvement structures in health. LINks were only created in 2007, and have taken some while to establish themselves. There is clearly scope for Heathwatch groups to duplicate the work of NHS foundation trust governors and liaison will be necessary with local authority representative organisations in advance of commissioning decisions being made. 

8.2 Health and Wellbeing Boards (clauses 178 – 183)

8.2.1 The bill places a duty of local councils to establish a Health and Wellbeing board for its area, and sets out its membership, which includes a councillor, the directors of adult social services, children’s services and public health, a Healthwatch representative, a representative of a local commissioning consortium, and other representatives that the local council thinks appropriate. Health and Wellbeing Boards will also have the duty to encourage integrated working by those who provide health or social care.

8.2.2 FTN view

The FTN considers that the proposals by the government for enhanced role for councils in health commissioning are an opportunity to extend the notion of whole place thinking and potentially realise more joined up care for patients. Local government, through the health and wellbeing boards, could delivering additional accountability and patient voice into commissioning health services.

8.2.3 The FTN believes that NHS foundation trust wider governance arrangements – with local members and elected governors – are now nearly seven years old, well established and developing to ensure the voice and needs of their diverse local communities and patient groups are heard. They offer stability in terms of local engagement and accountability. The role of governors and members should not be overlooked in the development of health and wellbeing boards.

February 2011