Annual accountability hearings: responses and further issues - Health Committee Contents


Appendix 7: Government's Response - Annual Accountability Hearing with Monitor

Introduction

On 14 September 2011, the House of Commons Health Committee (the Committee) published the report: Annual Accountability Hearing with Monitor.

The Committee proposed to review the work o Wendy got surprised when we received the info about a golf day, she asked me if I knew something and I didn't, she then said, what's the point to have so many golf days then.

f Monitor on an annual basis starting in Summer 2011. The Committee decided to take a similar approach in relation to CQC.

The Department strongly believes that these hearings are of great value in strengthening the accountability of the Department's independent Arm's Length Bodies to Parliament and the wider public.

Departmental response

We welcome this report and have carefully considered the Committee's recommendations and the issues it raises. The changes proposed for Monitor in the Health and Social Care Bill will expand and change Monitor's role from being the Independent Regulator of Foundation trusts. However, the Bill makes provision for Monitor to retain its intervention powers for a transitional period. The powers will be reviewed in 2015 and may be extended if necessary.

The Government's response to each of the recommendations made in relation to CQC is shown in the table below. Many of the Committee's recommendations were clearly for Monitor to take forward and we have indicated where we feel this is the case.

Department of Health response to the Health Select Committee Recommendations - Monitor

Introduction

Foundation Trusts - Monitor's continuing duties

Monitor faces a significant challenge in assessing and authorising for foundation trust status the remaining NHS trusts. We welcome the Government's decision to change April 2014 from the legal deadline for the completion of this process to a less rigid target, albeit one the Government strongly expects to be met for the majority of Trusts. Nevertheless, sheer numbers alone make the assessment task formidable, and the Government must be prepared to be even more flexible if circumstances demand it. (Paragraph 13)

Removing the 2014 date from the Bill is about responding to the NHS Future Forum recommendation to not have a cut -off date in legislation and enabling the minority of more challenged NHS trusts to make the necessary developments so they can achieve FT status on their own, with an existing FT or in another organisational form beyond 2014 and over an updated timescale to be specifically agreed. These trusts will continue to work towards FT status under new management arrangements. The Government's position remains unchanged and the aim is for the creation of a full FT sector so that there is a full cohort of sustainable providers of high quality healthcare services.

Monitor needs to be in a position to respond to the demands of applicant trusts, rather than trusts' programmes being artificially accelerated or delayed in line with Monitor's capacity. Monitor will, however, only be able to function effectively if the flow of applicants through the pipeline is phased and not back-loaded. The Department of Health therefore needs to manage the progress of applications as far as possible to ensure Monitor is able to work effectively. Where this is not possible, the Department must either provide Monitor with the necessary resources to temporarily increase its assessment capacity, or should relax deadlines for a particular trust to enable assessment to be undertaken with due care and consideration. (Paragraph 17)

Tripartite Formal Agreements (TFAs) are agreed documents that are now going into the public domain which set out a Trust's journey to FT status on their own, as part of an FT or in another organisational form. The development of the TFAs has enabled us to further clarify the trajectory to FT status. The Department is currently working with SHAs on how best to manage the trajectory and will continue to discuss this with Monitor.

The Department must resist the temptation to artificially accelerate the process by referring trusts to Monitor before they have reached the appropriate level - to do so would hinder Monitor's capacity to handle more realistic applications. (Paragraph 18)

SHAs are responsible for working with NHS Trusts to ensure when an application is submitted to the Department of Health, it is robust and fully able to stand up to the Monitor assessment process to ensure it is able to achieve FT status.

The Committee strongly supports the view that the standards for authorising foundation trusts must not fall as a result of the Government's desire to see all remaining NHS trusts become foundation trusts. We welcome the assurances on this point from both Monitor and the Government. We note that Monitor intends to review its approach to assessment in order to accommodate the extra demand s on its capacity. It is imperative that any change in process does not alter the standards expected of aspiring foundation trusts, either directly or as a result of the space created by a less comprehensive process. (Paragraph 25)

There will be no lowering of the bar to Ft status. Since Mid Staffordshire, there has been much more focus on quality in FT applications. Both Monitor and the DH have established quality metrics as part of their assessments of Trusts, and, Monitor and the Department of Health work much more directly with CQC to assure quality in aspirant FTs.

Within the FT Pipeline work, the Provider Executive Group (PEG) commissioned and has now implemented an additional quality framework which is now used by all Medical Directors across the country when assuring quality aspects of all FT applications they are asked to review. This process includes the use of a clinically endorsed set of quality indicators which are used to explicitly consider the outcomes of care provided at aspirant FTs alongside the more general clinical governance issues that are considered as part of an FT application. This work is now formalised as part of the process for reviewing FT applications and has been used on the most recent applicants, and will do so for those being reviewed going forward.

In addition, this processes for reviewing quality in FT applications will continue to be reviewed to ensure that quality of care remains the focus of organisations making the changes needed to progress to FT status. These reviews will be undertaken as part of the development of the single operating model for reviewing FT applications which will help the current 10 SHA model move forward effectively into one model for the clustered SHAs from January 2012 and ultimately for the NTDA.

Monitor's assessments of foundation trust performance show that although many foundation trusts are performing well, a significant proportion are struggling to meet financial and government standards. (Paragraph 27)

We acknowledge that the operating environment in the NHS has become increasingly challenging. The requirement for hospitals to remain fully focussed on delivering quality healthcare services for patients whilst the financial situation has become more demanding means it is arguably more challenging now to achieve FT status than before. We have not changed the requirements for achieving FT status and in fact the changing financial context, in particular the increasing efficiency requirements, has meant the test to become an FT has become more challenging. This is only right given the assessment for FT status is around preparing organisations to operate with more autonomy, in testing operating conditions but has impacted on the speed of applications.

It is for Monitor as the independent regulator to ensure that where FTs are struggling to meet requirements that appropriate actions are put in place to address them.

It is clear that some of the improvement in the numbers of foundation trusts in significant breach is accounted for by changes in targets which have been introduced by the Government. We agree that Monitor's compliance criteria should reflect performance measurements used by NHS Commissioners, the CQC and the Government. (Paragraph 29)

Operational and therefore for Monitor to respond to.

The Committee believes that the parallel existence of Monitor and the CQC creates a significant risk of cost and process duplication between the two bodies. It is essential that the scope and function of each body is clearly defined and that both bodies observe the limits of their responsibilities, while retaining a holistic view of the regulated organisations. (Paragraph 31)

Operational and therefore for Monitor to respond to.

It is right that Monitor adapts its regulatory approach and its use of formal intervention powers to reflect the circumstances of individual cases and we accept Monitor's reasons for not using its formal intervention powers in 2010-11. Nevertheless, we encourage Monitor not to be reticent to use its formal powers when necessary, and to regularly review the progress of trusts in significant breach. (Paragraph 33)

Operational and therefore for Monitor to respond to.

Over the next year, Monitor's foundation trust compliance role will become harder and more important. It must be prepared and resourced to meet this challenge. There will be more foundation trusts, many of them newly authorised, struggling to make demanding efficiency gains and to manage upheaval in the health landscape. Existing foundation trusts will also be affected. In this light, we welcome the fact that Monitor is increasing its monitoring of financial risk. We encourage Monitor to remain vigilant for further areas where closer scrutiny is needed. (Paragraph 36)

Operational and therefore for Monitor to respond to.

We are concerned about the proposals in the Health and Social Care Bill to reduce the financial oversight role of Monitor and increase the responsibilities of foundation trust governors in this area. We draw the attention of the House to the fact that Monitor reported in March 2011 that failures of governance within existing foundation trusts were a significant contributory cause to cases of significant breach during 2010 and we see little or no evidence that this position has changed sufficiently to justify the additional responsibility being placed on foundation trust governors. (Paragraph 41)

Foundation trusts were established to be autonomous and self-governing. We recognise that it can take some time to build up the capability of governors in a newly-authorised foundation trust. In response to the NHS Future Forum's recommendation, we have said we will give more time for governors to build capability in holding boards to account by extending the transitional period where Monitor retains specific intervention powers over them. This will apply to all foundation trusts and will last until 2016. For foundation trusts authorised after 31 March 2016, the powers will apply to them for up to two years after their authorisation. The powers will be reviewed in 2015, and may be extended if necessary.

We are actively seeking to build governor capability. The Health and Social Care Bill proposes to lay a duty on foundation trust directors to take steps to ensure that their governors are equipped with the skills and knowledge they need to perform their enhanced role of representing the interests of their members and holding directors to account for the performance of the trust. We are supplementing this with non-legislative measures: we are funding a project by Foundation Trust Governors' Association, the Foundation Trust Network and Monitor to develop induction, core and specialist training for governors. We will also encourage foundation trusts to take up existing training by the Foundation Trust Network to inform and improve pre-election processes so that governor candidates are better informed about the role and can assess their suitability and inclination to take it on. We will also encourage foundation trusts to build closer working relationships between their directors and governors so that the latter are better informed about the trust's operation and more able to identify risks and issues about its performance.

There will be other financial oversight of foundation trusts as well as through Monitor. Under our proposals the Foundation Trust Funding Facility (FTFF) terms and conditions would be developed to ensure that foundation trusts are financially viable and would restrict actions that are materially risky.

Development will be necessary if foundation trust governors are to have the skills required to successfully take on their new responsibilities and operate effectively in the new landscape. We noted that Monitor's ability to provide development at the required level may be limited by spending controls on arm's-length bodies. When we next meet Monitor, we expect to see clear evidence of their programme to support development for foundation trust governors. In the meantime the Government should provide additional resources to Monitor if required, or consider delaying the devolution of responsibilities until there is evidence that the effectiveness of foundation trust governors has been enhanced. (Paragraph 45)

Findings from recent reports by Monitor and the Foundation Trust Governors' Association show that the system of local accountability at foundation trusts is maturing and strengthening. Foundation trust governors have made good progress in understanding their role, and feeling better informed by their trusts, over the last three years (Monitor governors' 2010 survey, published in July 2011). Over 80% have received initial training and further training or briefings to develop them in the role. As a result more governors are clear about representing their stakeholders, understanding the trust's strategy and undertaking work on sub-committees.

We are actively seeking to build governor capability. The Health and Social Care Bill proposes to lay a duty on foundation trust directors to take steps to ensure that their governors are equipped with the skills and knowledge they need to perform their enhanced role of representing the interests of their members and holding directors to account for the performance of the trust. We are supplementing this with non-legislative measures: we are funding a project by Foundation Trust Governors' Association, the Foundation Trust Network and Monitor to develop induction, core and specialist training for governors. We will also encourage foundation trusts to take up existing training by the Foundation Trust Network to inform and improve pre-election processes so that governor candidates are better informed about the role and can assess their suitability and inclination to take it on. We will also encourage foundation trusts to build closer working relationships between their directors and governors so that the latter are better informed about the trust's operation and more able to identify risks and issues about its performance.

In response to the NHS Future Forum's recommendation, we have said we will give more time for governors to build capability in holding boards to account by extending the transitional period where Monitor retains specific intervention powers over them. This will apply to all foundation trusts and will last until 2016. For foundation trusts authorised after 31 March 2016, the powers will apply to them for up to two years after their authorisation. The powers will be reviewed in 2015, and may be extended if necessary.

We welcome the extension of Monitor's oversight powers for foundation trusts to 2016, and the fact that the powers will then be reviewed. (Paragraph 46)

See response to para 13.

The Government's reforms and the financial context have placed Monitor in a position where its foundation trust duties have escalated, albeit on a temporary basis, and where its activities in both authorisation and compliance are likely to increase. Maintaining standards at this time will be vital. Monitor will need to adapt if it is to take on this additional workload without lowering standards. The Government must ensure that Monitor has the resources necessary to maintain standards across foundation trusts while it retains responsibilities in this area. The next five years will be critical in ensuring that foundation trusts are in a fit state to survive and thrive in the new health landscape. (Paragraph 47)

See response to para 45. The Department will continue to discuss managing the transitional period with Monitor including the issue of resources.

Monitor's new role under the Health and Social Care Bill

We welcome the fact that Monitor's new role, as set out in the Health and Social Care Bill, has been more clearly defined following the Future Forum process. The change in 'signal' from 'economic regulator' to 'sector regulator' is also welcome, and will address some of the concerns raised following the introduction of the Bill. It is unclear whether the change will result in challenges under competition law being handled in the way the Government hopes. It is also the case, as has been acknowledged by Monitor, that competition law in this area is largely untested. This is another area where Monitor's future workload is somewhat unpredictable. Monitor will need to plan for a range of contingencies, and the Government will need to adapt its support as appropriate. (Paragraph 55)

Monitor to comment on operational aspects.

The Department will continue to discuss such issues with Monitor as they develop.

The scale of change in Monitor's operations is significant and many parts of Monitor's future role remain uncertain or unclear. This continuing uncertainty further complicates an already complex and challenging process of adapting to a substantial new role while maintaining residual foundation trust responsibilities. It is vital that the transition period is carefully managed, with each of Monitor's responsibilities, both old and new, being executed to a high standard. We are confident that Monitor is aware of the scale of this challenge, and we note that Monitor has begun to plan for the transition to its new role, as far as possible. When we revisit this topic next year we will evaluate how well Monitor has undertaken this transition. (Paragraph 61)

Monitor to comment on operational aspects.

The Health and Social Care Bill further increase the level of cooperation required between Monitor and the Care Quality Commission, with the joint licensing scheme requiring particularly close interaction. In consequence, we discussed with Monitor the potential for merging the two organisations. We note that there are strong arguments in favour of retaining a separate regulator for quality issues; a single regulator would require substantial safeguards to ensure that quality and safety did not come second to financial concerns. We are also concerned about the scale of challenges facing Monitor and the CQC, both of which are going through complicated transition periods, coupled with continuing uncertainty and financial risk in the health landscape. Given these factors, and despite the obvious risk of overlap, we do not think it would be appropriate to consider merging the two organisations at this time. (Paragraph 69)

The Department agrees that it would not be appropriate to consider merging the two organisations at this time.


 
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Prepared 7 March 2012