Commissioning: further issues - Health Committee Contents

Written evidence from Monitor (CFI 08)


1.1  Monitor welcomes the Health and Social Care Bill. We strongly support the Government's plans to modernise the NHS and make Monitor the economic regulator for health and adult social care. We believe it is right to have an economic regulator which is independent of political influence, can build specialist skills and is transparent in the way it sets prices, promotes competition where appropriate and deals with failure, both of markets and of institutions.


2.1  Monitor's current role is as the Independent Regulator for NHS foundation trusts. Our mission is to provide a regulatory framework which ensures that NHS foundation trusts are well led and financially robust so that they are able to deliver excellent care and value for money.

2.2  NHS foundation trusts are a key component of the purchaser/provider split that was established following the Health and Social Care Act 2003. When an organisation achieves NHS foundation trust status it is no longer accountable to Strategic Health Authorities and the Department of Health (who have ongoing responsibilities for commissioners). Instead NHS foundation trusts are accountable to their local communities (through their members and governors), to their commissioners (through contracts), to Monitor and to Parliament.

2.3  Monitor considers that the purchaser/provider split aims to ensure that the funding that is provided to the NHS achieves the best possible value for money, and that the NHS allocates the resources that it receives efficiently to meet the expectations of the public.


3.1  Monitor believes effective commissioning is integral to the success of proposals in the Health and Social Care Bill. GP consortia will be responsible for 80% of the NHS budget—around £88 billion for 2010-11. They will be expected to use this resource to improve the quality of care for their patients by bringing greater clinical expertise to commissioning activities.

3.2  The Health and Social Bill continues and enhances the policy of patient choice in the NHS so that there is greater competition among providers. For some services patient choice will not be appropriate, but there will be an expectation on commissioners to look to contract for services via competitive tenders (competition for the market), rather than issuing contracts non-competitively to incumbent providers.

3.3  Monitor is aware that interested parties have raised questions on the impact of the Health and Social Care Bill on commissioners' activities. It is therefore important to clarify the current status of proposals with regard to procurement.

3.4  Monitor agrees with the Department of Health that there is potential for commissioners to act in ways that might not promote competition, or to act anti-competitively, particularly if they are able to provide services and self-supply. For example, a consortium might decide to continue to roll over contracts for services delivered by their practices, rather than allowing other providers to bid for them through competitively tendering.

3.5  The Department of Health currently requires commissioners to follow the Principles and Rules for Cooperation and Competition (PRCC) when procuring health services. The PRCC contains 10 principles which help to ensure co-operation, while protecting competition, in NHS services. This includes the prevention of anti-competitive behaviours by commissioners. The Cooperation and Competition Panel (CCP) can investigate complaints where there has been a failure to comply with the PRCC, and it can make recommendations. However, it has no power to require that the recommendations are followed.


4.1  The Health and Social Care Bill sets out that commissioners may be subject to procurement and competition regulations - developed by the Department of Health but enforced by Monitor. These would require the NHS Commissioning Board and commissioning consortia to:

  • adhere to good procurement practice;
  • protect and promote patient choice; and
  • promote competition.

4.2  According to clause 64 of the Bill, Monitor may be given new powers to take action against, amongst other things, anti-competitive behaviour by commissioners. These powers will be set out in regulations and would enable Monitor to:

  • investigate a complaint against the NHS Commissioning Board and/or commissioning consortia for failing to observe these requirements.
  • require information from the NHS Commissioning Board and/or a commissioning consortia; and
  • require explanations from the NHS Commissioning Board or a Commissioning Consortium.

4.3  Monitor would only be able to use these powers under specific circumstances as outlined in the Bill. For example, if the NHS Commissioning Board or a commissioning consortium were to fail to comply with the regulations (under clause 63). However, the failure would have to be serious and Monitor would have to consider that the person making the complaint has "sufficient interest" in the arrangement.

4.4  The Bill does not specify whether this applies to individual health service users. Nor does it define serious failure or sufficient interest.

4.5  Also according to clause 63 of the Bill, Monitor may be given powers to require, if the investigation were to be upheld, the NHS Commissioning Board or commissioning consortium to:

  • remedy the failure;
  • put in place measures to prevent failures to comply with the requirements or to mitigate against the effects of failures;
  • vary or withdraw an on-going tender process; and
  • render an arrangement ineffective.

4.6  The Bill does not give Monitor the right to award damages to a claimant or compensation if a contract is declared ineffective.

4.7  Monitor considers that it is important that the new framework under which we will operate should go further than the protection against anti-competitive behaviour that is provided in the PRCC. We therefore support the proposal in the Bill that Monitor should have oversight relating to procurement of health and social care services, co-operation and agreements between providers and commissioners, the conduct of commissioners (from a competition perspective), and mergers and vertical integration between providers and commissioners.

4.8  When exercising these functions, Monitor would have to have regard to factors such as patient safety.

4.9  The Department of Health will consult on the regulations before they are made. The regulations would also need to be interpreted alongside existing EU and UK procurement law.

4.10  However, the extent of Monitor's remit in this area will only be clear once we have further detail from the Department of Health about the regulations to be brought forward. This includes details such as the criteria Monitor will have to apply in deciding whether to render a contract ineffective, the rights of appeal available to the NHS Commissioning Board and commissioning consortia, and the time limit for bringing a claim. Monitor is unable to provide clarity on how it will exercise these functions until the Department of Health has set out this detail.

4.11  Once Monitor has this information, we will carry out a full analysis of the situation. Before any decisions are taken, there will be full consultation and involvement of interested parties. This is paramount. We will only make the final decisions after careful consultation and analysis.

February 2011

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Prepared 5 April 2011