2013 accountability hearing with Monitor - Health Committee Contents

Conclusions and recommendations

Monitor's view on the NHS financial position

1.  The Committee drew two conclusions from the evidence presented by Monitor:

a)  It 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;

b)  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. (Paragraph 12)

Provider Regulation

2.  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. (Paragraph 17)

3.  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. (Paragraph 25)

4.  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 organisation continues to prioritise and resource its work in this area. (Paragraph 29)

5.  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. (Paragraph 30)

6.  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 organizations 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. (Paragraph 35)

7.  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. (Paragraph 39)

8.  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. (Paragraph 45)


9.  The Committee does not believe that this record constitutes an adequate response to its recommendation in last year's Accountability Report that Monitor should attach a high priority to its work on the tariff. The Committee believes that that the current tariff arrangements often create perverse incentives for providers and inhibit necessary service change. (Paragraph 51)

10.  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. The Committee requests that Monitor submits a report of this process to the Committee before 30th June 2014. (Paragraph 52)

11.  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, which would also assist in the elimination of "cherry picking". (Paragraph 56)

12.  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 allow for revised baselines, and to ensure that money retained through the application of the rule will be spent 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. (Paragraph 60)

13.  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. These changes raise important 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. (Paragraph 63)

Competition and integration

14.  The Committee notes Dr 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. (Paragraph 80)

15.  The Committee recognises however that 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 visits to ensure that commissioners understand the practical implications of the Guidance which was issued in December 2013. (Paragraph 81)

16.  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 findings of the Fair Playing Field review demonstrate the need for Monitor to develop a better understanding of the third sector, and the Committee will seek specific evidence on this matter at the next accountability hearing. (Paragraph 86)

17.  The Committee shares the widely expressed concern that the Competition Commission decision in the case of Bournemouth and Poole demonstrates that a new obstacle has been introduced which threatens to further slow the pace of change in the health and care sector in England. The Committee has repeatedly expressed its concern that the pace of change in the sector is glacial, and that failure to increase it threatens both the viability of the sector and the quality of the services it delivers. (Paragraph 98)

18.  The Committee notes that Monitor is taking steps to improve the support it provides to Trusts contemplating the merger process, following the case of Bournemouth and Poole. (Paragraph 99)

19.  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 will seek specific evidence of progress on this matter at the next accountability hearing. (Paragraph 100)

20.  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, intended to facilitate the longer term reconfiguration of the health and care sector, which are repeated here, and on which the Committee will seek further specific evidence:

a)  It 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;

b)  It should launch a review with the Competition Commission, and, in future, the CMA, of the effect of competition law on necessary institutional change to ensure that existing institutions are not allowed to impede necessary service reconfiguration. (Paragraph 106)

Monitor as an organisation

21.  The Committee welcomes Monitor's plans to develop more detailed and specific outcomes against which it can measure its own performance, and a more comprehensive performance measurement framework, and we will consider progress against these outcomes as part of our next accountability review with Monitor. The Committee believes that its two recommendations set out in Paragraph 107 will facilitate these developments. (Paragraph 110)

22.  It is essential that an organisation with such a central and crucial role as Monitor 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. (Paragraph 116)

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Prepared 26 March 2014