2013 accountability hearing with Monitor - Health Committee Contents


Monitor has an "exceptionally challenging" role, as the sector regulator for health services in England. In the Department of Health's view, Monitor is managing the transition to its new functions well, and is "well placed to go from strength to strength as an effective regulator in the health and social care system." The Foundation Trust Network (FTN) told us that in their view, "Monitor has made considerable progress in adapting to its new sector regulatory role, including successful introduction for FTs of the new licensing regime." However, the challenges for Monitor are greater than ever.

Monitor's view on the NHS financial position

In the light of Monitor's evidence on the NHS financial position, the Committee remains concerned that the model of care provided by the health and care system is not changing quickly enough, with the result that pressures continue to build, threatening the financial stability of individual providers, and therefore the quality of care provided. These pressures are likely to be particularly marked in the acute sector as plans are prepared and implemented to achieve the resource transfer required by the introduction of the Better Care Fund from April 2015.

Provider regulation

As the NHS financial situation tightens, the challenge for Monitor in supporting trusts in financial difficulty is likely to increase, and it is therefore essential that the organization continues to prioritise and resource its work in this area. It is also important that pressures within individual providers are addressed in the context of the local health economy. The requirement for major change in the care model can only be delivered if individual providers, and Monitor as their regulator, look beyond preserving existing structures and address the need to develop different structures to meet changing needs.

Monitor's role includes assessing new Foundation Trusts. However following changes to the CQCs's inspection and rating regime, Monitor's Board decided not to finalise any assessment decisions on applicant trusts until updated assurance could be received from the CQC under their new inspection regime, and no new Foundation Trusts have since been authorised. The Department of Health has also abandoned its original objective that the majority of aspirant Trusts should become Foundation Trusts in 2014. We welcome this change of approach which focuses on the requirement to improve the underlying reality rather than meet an artificial timescale.

In October 2013 Monitor introduced a new Risk Assessment Framework for overseeing the governance and finances of Foundation Trusts. Evidence to the Committee suggests that Foundation Trusts are currently subject to closer supervision and scrutiny by Monitor than was envisaged by ministers when Foundation Trust status was originally put into legislation. While the Committee is sympathetic to the view that Monitor must satisfy itself that Foundation Trusts are adequately addressing the issues they face, it is also important that heavy handed regulation does not inhibit necessary change. At a time when NHS providers face an unprecedented need to change the care model, Monitor must be a facilitator of change, not an obstacle.

This year the Committee received evidence of some ongoing concerns about overlap and lack of clarity between organisations involved in regulating and overseeing the NHS. The Committee has expressed concern before about the impact on patient safety of unclear regulatory responsibilities, and the fact that recent institutional change may have compounded this problem reinforces the need for it to be addressed as a matter of urgency. The Committee has therefore recommended that Monitor and the CQC should meet jointly with those organisations which expressed concern on this subject to this Inquiry and should ensure that all parties are clear how it is planned that these concerns will be addressed.

It is essential that Monitor's approach is appropriate for all types of trust, and Monitor has acknowledged this. The Committee has recommended that Monitor keeps its processes under review to ensure they are appropriate to all types of trust.

The Care Bill proposes to give the CQC specific powers to monitor the financial strength of approximately 50 to 60 care providers whose financial collapse could trigger a local crisis in the delivery of care. We have reiterated our earlier recommendation that the Government should reconsider its decision to allocate this role to the CQC and that it should instead ask Monitor to undertake this role. Although this development would divide oversight of adult social care between Monitor and the CQC, it would facilitate the reduction of boundaries between healthcare and social care and would maintain the existing distinction of principle between the CQC, which focuses on care quality, and Monitor, which focuses on financial performance.


In last year's Accountability Report the Committee recommended that Monitor should attach a high priority to its work on the tariff. We do not believe that Monitor's record on this to date constitutes an adequate response to this, as the Committee believes that that the current tariff arrangements often create perverse incentives for providers and inhibit necessary service change. The Committee therefore repeats its recommendation from last year that Monitor should attach a higher priority to its work on this subject and further recommends that Monitor and NHS England should initiate a formal joint process for a prioritised review of the NHS tariff arrangements with the objective of identifying and eliminating perverse incentives and introducing new tariff structures which incentivise necessary service change.

Concern continues to be reported to the Committee about "cherry picking". As we recommended in our report on Public Expenditure, it is important that payments to providers reflect the costs of treatment, and that the payments system is able to distinguish accurately between different types of case. It should be a priority for NHS England and Monitor to work to develop a payments system which reflects this requirement. The Committee welcomes the fact that Monitor has acknowledged the need to improve the quality of the costing on which prices are based; improved cost information is a key part of the wider tariff review proposed by the Committee.

The Committee has heard that the marginal rate rule, while it has the potential to act as a lever to reduce levels of emergency admissions and improve care outside hospitals, also carries the risk of pushing trusts into financial difficulty where admissions are unavoidable. Monitor also told us that the proportion of funding retained by commissioners "is not all being spent as effectively as we would like". Changes have been introduced this year to the marginal rate rule for emergency admissions, to allow for revised baselines, and with the aim ensure that money retained through the application of the rule will be spent more transparently and effectively, to enable more patients to be treated in community settings. We will seek an update on progress in this important area from Monitor and from NHS England later in 2014.

Monitor told the Committee that "it is going to be quite a while" before national prices can be established that will enable the introduction of a well-based tariff in mental health. Since our accountability hearing, concerns have also been raised about differences in the changes being made to the prices paid for care in the acute sector and the non-acute sector. This may raise questions about the relative priority of acute and non-acute care, and undermine delivery of the objective of parity of esteem between mental and physical healthcare. The Committee will return to this issue in our inquiry into Child and Adolescent Mental Health Services.

Competition and integration

The Committee notes David Bennett's argument that the Section 75 rules are, except for the references to integration, essentially the same as the "principles and rules for cooperation and competition" which have been applied for several years. However, many new commissioning organisations have expressed concern about the impact of these principles on their actions. The Committee therefore recommends that Monitor undertakes a programme of meetings and visit to ensure that commissioners understand the practical implications of the Guidance which was issued in December 2013.

The Committee recognizes that Monitor's developing role as the health and care sector regulator requires it to develop a detailed understanding of a wide range of providers including primary care and third sector providers. Concerns have been expressed to the Committee by representatives of both the third sector and primary care that Monitor has not yet developed this understanding in sufficient depth. The Committee will seek specific evidence on this matter at its next accountability hearing.

Monitor is taking steps to improve the support it provides to Trusts contemplating the merger process, following the case of Bournemouth and Poole. The Committee remains concerned, however, that uncertainty persists in this area; it therefore recommends that Monitor should work with the Competition Commission, and in future the Competition and Markets Authority, to develop joint guidance, similar to the joint guidance it developed with NHS England on the Section 75 regulations, which demonstrates how trusts should ensure that institutional structures are not allowed to impede necessary change in the care model. Monitor would need to ensure that such joint guidance is consistent with its statutory duty to enable service integration.

The Committee continues to believe that the development of a more integrated care model is fundamental to the delivery of high quality good value care. In addition to its work as the routine regulator of the health and care sector, this report therefore contains two specific recommendations addressed to Monitor which are repeated here and which are intended to facilitate the longer term reconfiguration of the health and care sector:

  Monitor should launch a review with NHS England of the structure and level of National Tariff payments designed to identify and eliminate perverse incentives and incentivise necessary service reconfiguration;

  It should launch a review with the Competition Commission and, in future, the Competition and Markets Authority, of the effect of competition law on necessary institutional change to ensure that existing institutions are not allowed to impede necessary service reconfiguration.

Monitor as an organisation

Recruiting the right staff in the right numbers to deliver its new functions effectively is essential for Monitor; and it is important that an organisation with such a central role has appropriate clinical input. The Committee was frustrated to learn that the Department of Health delayed the appointment of a Medical Director for several months due to an argument about appropriate pay levels. The Committee regards this as an absurd distortion of priorities and strongly supports the formation of a fully staffed Patient and Clinical Engagement Team within Monitor at the earliest possible date.

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Prepared 26 March 2014