2013 accountability hearing with Monitor - Health Committee Contents

3  Provider Regulation

Authorising Foundation Trusts

13. Monitor has run the authorisation process for Foundation Trusts since 2004. The Government was previously intending 2014 as the target date for all Trusts to have become FTs, and at last year's accountability hearing, Monitor reported that it was scaling up resources to allow it to manage an expected increase in the number of assessments it needed to process.[15]

14. However, Monitor have reported to us this year that the introduction of the Care Quality Commission's new inspection regime has had implications for the current authorisation process:

    Monitor's Board needs to be assured of the quality of care at applicant trusts before they are authorised as foundation trusts. In light of the CQC's work to design and pilot a new inspection regime during 2013/14, our 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.

    In order to minimise the effect on trusts in the pipeline, we worked with NHS TDA and CQC to make sure that:

      applicants closest to referral from the NHS TDA and those that we were already assessing were prioritised for an updated CQC inspection. Three of the four acute trusts currently with us for assessment will have been inspected by early December.

      an inspection approach for non-acute trusts is developed as soon as possible. CQC's expectation is that it will pilot this in the new year; and

      we can continue to work with applicants as the CQC transitions to its new regime.

    As a transitional measure, pending finalisation by the CQC of their approach, we decided to split the assessment process into two phases for recent applicants. The first will focus on areas that will benefit applicants most through early identification of issues, whilst minimising the risk of duplication in the second phase. The second phase will commence when a CQC inspection has been satisfactorily completed.

    For deferred and postponed applicant trusts, we do not expect to start reassessing them until the outcome of their CQC inspection is known. Deferral periods have been extended to allow for this.[16]

15. According to Monitor, the NHS TDA estimated in July this year that 14 of the trusts in its portfolio could not be put forward for NHS foundation trust status in their current organisational form. Therefore 69 trusts remain in the NHS TDA pipeline.The Department of Health reports that it now considers that "the majority of aspirant Trusts will now not become FTs in 2014. The key challenge now is that we ensure that aspirant trusts achieve the transition to FT at the right time for them."[17]

16. Dr Bennett was supportive of this decision:

    The danger in my mind with setting a very short deadline was that corners would be attempted to be cut.... more flexibility around the time scale is right...I think David Flory and his people are very committed to getting these trusts up to the requisite standard as fast as they can, but I do not think there is any pretending that it is going to be a very big challenge in some of these organisations."[18]

17. 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. No new Foundation Trusts have since been authorised, and the Department of Health has 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.

Regulating Foundations Trusts

18. Monitor now issues as provider licence which was granted to NHS Foundation Trusts on 1st April 2013. This replaced trusts' Terms of Authorisation as Monitor's main regulatory tool. Other providers of NHS funded health care services must hold a provider licence from 1st April 2014, unless they meet exemption criteria set out by DH.[19]Monitor reports that:

    While the licence sets out requirements for trusts covering pricing, competition and integration, the important and associated challenge for Monitor during the year was to adapt our framework to assess trusts' governance and financial risk against this new licence regime.[20]

19. The FTN praise Monitor's introduction of the licensing system, saying that it has been "genuinely consultative in developing proposals and acted on feedback from our members"[21] They do, however, identify areas where they believe further work is needed:

    Our members reflect a generally smooth transition to the new licence regime. However, aspects of the regime need further work including:

    ·  Designation of Commissioner Requested Services (CRS) i.e. services identified by commissioners as essential to keep going if a provider gets into difficulty

    ·  The Risk Assessment Framework

    ·  Risk rating forward plans

    ·  Governance risk ratings and proposals for governance reviews.[22]

20. Until the introduction of the provider license this year, Monitor had previously monitored foundation trusts' compliance with the terms of their authorisation under the Compliance Framework. This has been revised and is now known as the Risk Assessment Framework, which came into force on 1st October 2013. According to Monitor,

    The principles behind the (RAF) are similar to those Monitor has used so far in regulating NHS foundation trusts in that they are used to hold foundation trusts to account for their quality governance and financial stability. They do not represent any fundamental change to the regulatory approach Monitor has adopted.[23]

21. However, the Foundation Trust Network expressed concerns in their written evidence. According to the FTN, the Francis inquiry "raised questions about the efficacy of [Monitor's] regulatory oversight, and, more generally, about the quality of NHS care, leading to increased expectations of regulation and all regulators".[24] This, they argue, has the potential to have a damaging impact on Monitor's regulatory approach:

    This low-trust environment has created external pressures on Monitor to become more interventionalist in its regulation of foundation trusts and more risk-averse. This desire to "prevent another Mid-Staffs" risks creating an over-bearing and expensive system of regulation in response to one or two worst-case examples. It also threatens to replace risk-based regulation with performance management, a shift clearly evident in Monitor's growing scrutiny of A&E performance against targets".[25]

22. The Foundation Trust Network reports concern amongst its members around both financial risk monitoring and governance monitoring, arguing that "the Risk Assessment Framework ... appears to herald a more cautious and interventionist approach from Monitor, risking inappropriate regulatory action against many more trusts."[26] The move to a more 'interventionist' approach was discussed with Monitor in oral evidence. Dr Bennett told the Committee:

    The FT policy establishes foundation trusts as autonomous bodies that are largely free to make their own decisions unless they get into serious difficulty, and at that point we step in. That then leaves open all sorts of questions about how closely we should be monitoring them. Should it be "Until they get into serious difficulty", "In order to anticipate whether or not they might do so", and, indeed, "What constitutes serious difficulty?" What we are increasingly doing is monitoring more closely and stepping in at an earlier stage. But it is a difficult judgment, and I am sure you will find other people who will say we are beginning to pay too much attention to what they are up to and, in some cases, even stepping in at too early a stage. But my sense is that we do need to be monitoring more closely, trying to anticipate problems and stepping in more quickly where necessary.[27]

23. He went on to say:

    I think, partly as a result of the increasing pressure on the system and partly as a result, I frankly think, of the public and Parliament having a lower risk appetite than they did back in 2004, in general—but we have seen it in the financial services sector as a very good example—for both of those reasons, my view is that we need a somewhat shorter arm and that is what the FTN is reflecting.[28]

24. As Stephen Hay pointed out, at the time of our oral evidence session the new Risk Assessment Framework had only been operational for six weeks, so Monitor told us that they "will have to see how it plays out over the next year".[29] Dr Bennett told us that in his view a pragmatic approach was needed: "As to the length of the arm, we have to be pragmatic. It is where we feel it is about right. If the evidence is, for example, that we are having a lot of trusts fail and we are not either spotting it soon enough or not doing enough about it, we are going to have to shorten it a bit more."[30]

25. It is clear to the Committee 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 Trust managements are 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.

Supporting Foundation Trusts in financial difficulty

26. Monitor explained that there are two stages to its regulatory oversight of Foundation Trusts-firstly, how closely they are monitored, and secondly, how quickly and strongly Monitor intervene when there is cause to be concerned.[31]In terms of Monitor's response to Foundation Trusts in difficulty, Dr Bennett told the Committee that there were two important lessons he has learnt in this area. The first lesson was to look at an earlier stage at whether there are structural issues:

    To a certain extent, in the past, we used to focus on the leadership of the trust, the board, the management of the trust, and say, "If they are failing, often almost invariably there are weaknesses in the management," and we would try and fix that. But increasingly—and I think this is partly a reflection of the margin for things being less than perfect shrinking—we are seeing that even when you fix the management, if there are underlying structural problems, you still have not fixed the financial problem. Then that extends how long it takes to fix it. So one of the lessons is, at a very early stage, to try and understand if there are structural problems, so that we can get going on those straight away.[32]

27. Secondly, Dr Bennett emphasised the need to work more broadly across whole health economies, rather than just at individual institutions:

    We have a failure regime which is institutionally based: it is about individual trusts. We are applying it for the first time at Mid Staffordshire, and the TDA applied it for the first time in South London. Particularly looking at Mid Staffordshire, what is absolutely clear is that we have a health economy that is failing and the worst consequence of that is in Mid Staffordshire, but it is most certainly not confined to Mid Staffordshire. What we really need is a failure regime for health economies. We can construct that and that is effectively what we are trying do with Milton Keynes and Bedford now, to say they are not in failure but they are struggling and we need to look at the whole health economy, not just individual institutions.[33]

28. When asked whether he thought the sector was approaching "crisis point", Dr Bennett told the Committee that "the challenges are getting greater".[34] Monitor's written evidence shows that the number of Foundation Trusts in difficulty has substantially increased over the past year, and the increasing financial challenges for the NHS is likely to translate into increased workload and challenges for Monitor; in response to this, Dr Bennett told us that they "are significantly increasing their capacity", and that they plan to "get more senior people with real managerial experience to help turn around under-performing trusts."[35]

29. The challenge for Monitor in supporting Trusts in financial difficulty is likely to increase as the NHS financial situation tightens. It is essential that the organization continues to prioritise and resource its work in this area.

30. 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, referred to in this and many other reports of this Committee, 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.

Co-operation with CQC and other organisations

31. The Francis report into the failings at Mid Staffs has implications across the NHS and the organisations that work with it; when asked if they thought Monitor's new Risk Assessment Framework for monitoring Foundation Trusts could prevent another Mid-Staffs, Dr Bennett said that in his view "the most important changes that makes a Mid Staffordshire, and indeed a Morecambe Bay, less likely are the changes that are going on with the CQC."[36] However Stephen Hay told us that lessons learned from Mid Staffs have informed the development of the non-financial elements of the new Risk Assessment Framework:

    On the non-financial side, the old compliance framework had become very complicated and you almost needed a PhD to understand how it operated. We have simplified it. We have reflected a lot of the learning coming out of Mid Staffordshire and some of the leading indicators around patient surveys, staff surveys and the quality governance framework in it to, as David says, pick up those issues at an earlier stage.[37]

32. The issue of better joint working with the CQC was also raised at our evidence session:

    On the issue of working together, that is very important and we do work extremely closely together, at all sorts of levels. I have a conversation with David Behan probably every week. People in Stephen's organisation are talking to their opposite numbers in the CQC daily and sometimes hourly where there are problems in particular at trusts. It is absolutely essential that we work closely together.[38]

33. However our written evidence revealed some ongoing concerns about overlap and lack of clarity between organisations. In the view of the Foundation Trust Network:

    Clarifying Monitor's relationships with other regulatory and oversight bodies for the NHS, particularly their respective roles and responsibilities, is vital. We welcome steps Monitor, Care Quality Commission (CQC) and NHS Trust Development Authority (TDA) are taking to clarify operation of the failure regime, particularly special measures, but our members continue to report confusion about these new approaches and the regulators' respective roles.

    There is significant potential overlap between Monitor and CQC on the governance and leadership of organisations, particularly with development of CQC's 'well-led?' domain, and with NHS England. Similarly, Monitor must work closely with the TDA to avoid overly burdensome and duplicative processes and requirements on aspirant trusts as they make their case for FT status.

    The absence of a consistent and coherent approach to common concerns by the different bodies risks duplication and confusion, and inconsistent assessments of compliance or trusts being penalised twice for the same issue. Both CQC and Monitor use definitions of "fit and proper person" as part of their registration/ licensing requirements but it is unclear whether the two approaches align.[39]

34. The Royal College of Nursing echoed this:

    There are also now many agencies with a regulatory remit over different parts of the health care system: Monitor with its license for FTs, and in 2014, license for some larger providers of NHS care, the Trust Development Agency (TDA) for non-FTs, and NHS England as part of contracting and defining currencies for nationally priced services[6].This is without including others such as the CQC, Healthwatch etc. This can seem bewildering and raises serious concerns around inconsistencies if they do not work together successfully.[40]

35. The Committee has expressed concern before about the impact on patient safety of unclear regulatory responsibilities. 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 recommends 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. The Committee requests that Monitor submits a report of this process to the Committee before 30th June 2014.

Approach to non-acute Trusts

36. In their written evidence, the FTN state that "it is essential that Monitor's approach is appropriate for all types of trusts, not just acute trusts". They added that "feedback from our Members indicates that Monitor needs to strengthen its understanding and approach to community and mental health service providers as well as tailoring its approach to the particular issues and needs of integrated service providers, which provide social care as well as NHS services." Specifically in relation to authorisation, the FTN report that "some non-acute providers question the relevance of some information requested and aspects of the process to their type of organisation."[41]

37. David Bennett agreed that there was a need to focus on all types of trust: "I do not want to overstate it, but there is almost an obsession with acute trusts because it is the bit that people look at, where the light is shining. But we have to shine the light everywhere".[42] In terms of Monitor's approach, Dr Bennett said:

    We certainly need to change—and we have completely recognised this—or to adapt the way we look at trusts that are not the sort of traditional acute or mental health trusts that we are used to, and we have done that. One of the problems in almost anywhere except for acute is that the availability of information about these trusts is very weak, so it is very difficult to measure it. But we are trying to do our best in the circumstances. We chose not to—and you may disagree with this—say, "This is a sector with poor information that is not well understood. Therefore, we will not authorise anybody as a foundation trust." We have tried to be pragmatic and do the best we can, but we are also slowly getting them to produce more reliable data, so that, eventually, I hope every single bit of the provider landscape will be subject to the same degree of scrutiny as acute trusts are today.[43]

38. Monitor sent us further information outlining its approach to non-acute trusts. Monitor currently oversees 41 mental health foundation trusts and three ambulance trusts, reporting that it applies to them "a similar level of scrutiny as their acute peers":

    As with acute providers, we gather financial and non-financial information on a quarterly basis in coming to a view of the organisation's compliance with the governance and financial requirements of their license. The financial information we gather is the same across all foundation trusts.

    The non-financial information we gather generally informs our views of governance performance. Trusts are rated against a small number of relevant national access or outcomes targets for that provider. These targets differ across acute, mental health and ambulance foundation trusts, but can include, for example, performance against the Care Approach Programme targets (mental health trusts) and emergency response time targets (ambulance trusts). Any CQC concerns are also taken into consideration, as are other material third party concerns.[44]

39. The Foundation Trust Network told us that "it is essential that Monitor's approach is appropriate for all types of trusts." We agree.We are pleased that Monitor has acknowledged the need to "shine the light everywhere", not just on acute trusts, and we recommend that it keeps its processes under review to ensure they are appropriate to all types of trust.

Financial regulation of social care

40. 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. Subject to the Bill receiving Royal Assent, from April 2015 CQC will:

    "i. Require regular financial and relevant performance information from some providers.

    "ii. Provide early warning of a provider's failure.

    "iii. Seek to ensure a managed and orderly closure of a provider's business if it cannot continue to provide services.[45]

41. The CQC said that this "will strengthen our ability to help make sure that concerns about people's care are identified and acted upon as early as possible." They add that they will:

    "i. Carry out financial checks on a small number of providers (based on their size, local or regional concentration and specialisation of services which makes them difficult to replace).

    "ii. Monitor risks to financial sustainability and, depending on the level of risk, ensure these providers have effective 'sustainability plans' in place to satisfy us that it can manage the risk. We will need to be sure that the provider is taking sufficient steps to address a threat to their business sustainability. We will be able to commission an independent business review to help the provider become financially sustainable.

    "iii. Require information from providers in order to facilitate an orderly closure of a provider's business, should that become necessary, and ensure the continuity of care for people who use the service.

    "iv. Oversee and coordinate the process when a provider fails across all involved local authorities, and communicating nationally on progress to provide reassurance and information."[46]

42. The CQC has been asked to take on this additional responsibility because it relates specifically to adult social care, a sector which Monitor does not cover. The Government's response to their consultation on Market Oversight of Adult Social Care explained the reasoning behind the CQC being tasked with these functions:

    the Government believes there are greater benefits for service users to having a single regulator which oversees care and support services and can build a picture of overall performance combining quality and financial data. Consequently the Government will legislate to enable the CQC to undertake this function.[47]

43. In oral evidence to the Committee, David Behan of the CQC said that in order to fulfil their obligations the CQC would need to "buy in skills from organisations that do insolvency work". David Prior explained that the CQC did not have the financial skills that were required and it is highly unlikely that they would want to have them in house.[48]

44. We asked for Monitor's view on the allocation of responsibility for adult social care financial regulation, and they responded as follows:

    Ultimately, it is for the Department of Health to determine where this responsibility should sit. However, it is recognised that we have insight into financial regulation that may be useful to the CQC as it develops a framework and we will work collaboratively with them to provide advice where that is helpful.[49]

45. We recommend that the Government should reconsider its decision to allocate responsibility for the financial regulation of social care to CQC and that it should 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.

15   Health Committee, Tenth Report of Session 2012-13, 2012 Accountability Hearing with Monitor, oral evidence, Q28 Back

16   Monitor (AMO 0010), para2.7, 2.9 Back

17   Monitor (AMO 0010), para 2.18; Department of Health, para 14 Back

18   Q133 Back

19   Monitor (AMO 0010), para 3.3 Back

20   Monitor (AMO 0010), para 3.3 Back

21   Foundation Trust Network (AMO 0007), p1 Back

22   Foundation Trust Network (AMO 0007), para 7.3 Back

23   2012 Accountability hearing with Monitor - response, p7 Back

24   Foundation Trust Network (AMO 0007), para 2.3 Back

25   Foundation Trust Network (AMO 0007), para 2.4 Back

26   Foundation Trust Network (AMO 0007), summary  Back

27   Q24 Back

28   Q99 Back

29   Q100 Back

30   Q100 Back

31   Q101 Back

32   Q14 Back

33   Q14 Back

34   Q18 Back

35   Q25 Back

36   Q104 Back

37   Q100 Back

38   Q107 Back

39   Foundation Trust Network (AMO 0007), paras 3.1-3.3 Back

40   Royal College of Nursing (AMO 0006), para 5.3 Back

41   Foundation Trust Network (AMO 0007), paras 4.3, 12.1 Back

42   Q125 Back

43   Q122 Back

44   Monitor supplementary information (AMO 0013), para 3.2 Back

45   Health Committee, Sixth Report of session 2013-2014, 2013 Accountability Hearing with the CQC,para 52  Back

46   Health Committee, Sixth Report of session 2013-2014, 2013 Accountability Hearing with the CQC, para 53 Back

47   Health Committee, Sixth Report of session 2013-2014, 2013 Accountability Hearing with the CQC, para 54 Back

48   Health Committee, Sixth Report of session 2013-2014, 2013 Accountability Hearing with the CQC, para 55


49   Monitor supplementary information (AMO 0013), para 3.1 Back

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Prepared 26 March 2014