Appendix - Monitor response
The Health Select Committee made a number of specific
recommendations to Monitor as part of the annual accountability
process. Most of these included the need to further clarify our
remit within the health sector and how we work with other bodies.
We agree with the need for this work and this document comprises
our responses to these recommendations.
Whilst the majority of the Committee's recommendations
are for Monitor to act on, some are properly responded to by the
Department of Health, for example where they comment on legislation,
departmental policy or cross-cutting issues. However, as an independent
arm's length body it is appropriate that Monitor should respond
to the majority of the recommendations made by the Committee.
Many of the Committee's recommendations had already
been included as actions in the Monitor business plan and others
we are progressing as a result of listening to the Committee's
views. We are pleased to appear in front of the Committee as
part of an annual accountability process and to provide information
to the Committee to aid its work as necessary throughout the year.
We view the Committee's work as providing us with an opportunity
to contribute to the efficient functioning and development of
the healthcare system, to update Parliament and to get its feedback.
Provider regulation
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)
We agree with the Committee that it is important
Monitor facilitates change and it is our stated aim to make it
easier for providers to innovate by helping to lower barriers
to change[2].
As part of this we are being more flexible in assessing
trusts with new and possibly untried business models, or trusts
which have only a very limited track record in their current configuration.
We are also reviewing our regulatory processes to ensure we give
providers the freedom to take appropriate risks and to avoid any
unnecessary inhibition on their ability to innovate and change
while enabling us to spot serious problems and intervene swiftly.
This will require striking a careful balance.
As part of striking this balance and supporting change
we will also be placing greater emphasis on the assessment of
the institutional and individual capabilities of current and applicant
trusts.
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.
(Paragraph 29)
Monitor has core duties to ensure that public providers
are well led and that essential NHS services are maintained.
Our corporate strategy published in April 2014[3]
sets out how we intend to fulfil these two responsibilities.
Ultimately, we will work to ensure that patients have continued
access to the services they need.
More broadly, our strategy sets out how we will work
to ensure the health sector works better for patients. In summary,
in relation to foundation trusts we will:
- Minimise the impact on patients
of poorly performing providers of NHS services by identifying
problems early and acting quickly;
- Make it easier for providers to innovate by helping
to lower barriers to change
- Help to strengthen the capabilities of individuals
and institutions;
- Reduce the risk that providers fail by promoting
development of robust local service strategies;
- Take a health-economy-wide approach to resolving
problems when a provider does fail; and
- Concentrate on maintaining services, not institutions,
where provider failure cannot be avoided.
In circumstances where funding for bodies such as
Monitor is necessarily constrained we are clear that our work
in provider regulation is amongst our highest priorities. In
order to maximise our impact in this area we will be conducting
a review of our intervention approaches this year in order to
focus our efforts on those which are having maximum impact and
seeking to identify new intervention approaches which might be
more effective in returning struggling foundation trusts to better
health.
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)
Although the continuity of service regime as set
out in the Health and Social Care Act 2012 our aim is to work
with partner organisation, especially NHS England and the Trust
Development Authority (TDA) to address problems at struggling
and failing trusts on a health economy basis. Providers do not
operate in isolation and a failing provider often reflects broader
problems in its local health economy. Specific measures we are
taking include:
· Developing
tools to enable regular reviews of local health economies to facilitate
earlier identification of problems;
· Working with
NHS England and the TDA to identify and put in place a package
of support for the most challenged local health economies; and
· Ensuring that
work undertaken by Contingency Planning Teams and Trust Special
Administrators includes broad stakeholder engagement across the
local health economy;
· Ensuring that
work undertaken by Contingency Planning Teams is co-ordinated
with, and ideally jointly sponsored by, commissioners and, where
appropriate, TDA.
For example we are already working with commissioners,
the TDA and NHS England across the Milton Keynes and Bedford area
to find solutions for two providers (one foundation trust, one
NHS trust) with significant financial challenges that ensured
patients in those areas have continued access to the services
they require.
Where a trust does fail, our focus shifts from the
sustainability of the institution to the sustainability of its
services. This may well mean that seriously failing trusts do
not survive in their original organisational form, as is likely
at Mid Staffordshire NHS Foundation Trust and Heatherwood and
Wexham Park NHS Foundation Trust.
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.
(Paragraph 35)
We agree that it is important for all stakeholders
concerned with the health service in England to have a clear understanding
of the roles and responsibilities of regulatory organisations.
We also acknowledge that there is not an adequate wide-spread
understanding of Monitor's and CQC's respective roles with respect
to patient safety and service quality. We are currently working
with the Care Quality Commission (CQC) to implement the Committee's
recommendation and will provide the Committee with a report on
our progress before 30th June 2014.
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)
Since our inception, we have sought to refine and
develop our regulatory approach to ensure it is fit for purpose
(the National Audit Office acknowledged this in a recent report[4])
and will continue to do so. Over the coming months we will be:
· developing
tools for the assessment and regulation of smaller acute providers;
· gathering and
assessing evidence on the business model for provision of community
services to inform our regulatory approach; and
· reviewing our
Risk Assessment Framework and the NHS provider licence a year
on from implementation to ensure they are appropriate to all types
of trust.
As previously stated, we are developing our assessment
approaches by placing greater emphasis on the assessment of the
institutional and individual capabilities of applicant trusts.
This should enable us to be more flexible in assessing trusts
with new and possibly untried business models, or trusts which
have only a very limited track record in their current configuration
Pricing
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)
Monitor took on responsibility for the pricing system
from the Department of Health in autumn 2013 with our first tariff
operating from last month, April 2014. This was a new responsibility
for Monitor within a newly restructured NHS.
We share the Committee's concern with the adequacy
of the previous payment system design; both the incentives it
created and the data on which it was based. However, there are
considerable risks to making significant changes to the pricing
system in the absence of sufficiently accurate cost data and in
the context of a new and untested system architecture. Therefore,
we took the decision to establish a program of systematic reforms
after a short period of stability and to start by building an
evidence base to support the changes as they are introduced. This
will enable us to undertake due diligence on both existing and
proposed policies and limit any unforeseen consequences of changes.
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)
Monitor and NHS England already have joint working
arrangements in place which include joint governance structures
and working groups. Their work streams include identifying perverse
incentives in the current payment structure and how to address
them. We are satisfied that these arrangements are sufficient
to answer the Committee's concerns but will keep them under review
and make alternative arrangements if necessary.
In order to address the perverse incentives within
the Tariff we require high quality patient level data to ensure
changes to Tariff incentivise service change in the interests
of patients. We have already embarked on a multi-year plan to
rapidly improve data quality, with particular emphasis on securing
data from all non-acute providers and collecting data at patient
level.
However, in recognition of concerns about how the
current system is operating we also identified certain areas of
high priority that we sought to address more quickly, even if
through interim measures. These were the marginal rate rule for
emergency admissions and changes to the local variations rules
to empower local health economies to innovate and address any
perverse incentives locally, especially with regard to the integration
of care.
We started receiving cases for local modification
from 01 April 2014 and are in the process of reviewing them and
notifying parties of our decisions. We intend to publish the
details of these cases on our website so that decisions are transparent
and the sector can learn from them. We will also be publishing
tools and intelligence gathered from providers and commissioners
by January 2015 to further enable informed local price setting.
This will include the publication of local payment design examples
for multi-lateral risk sharing.
In relation to the marginal rate for emergency admissions
Monitor and NHS England have been working to understand how and
when baselines have been updated. Further, NHS England is collecting
information about where and how the withheld 70% is being spent
to understand the types of projects benefitting from the marginal
rate.
In parallel to this we have already started in-depth
work examining payment approaches to enable service change in
urgent and emergency care and in integrated care for the elderly
and those with long term health conditions. We will be providing
on-going support and evaluating payment approaches in these areas
to ensure we can design evidence based payment system rules in
this area.
We are aware that funding for mental health is of
increasing concern to service users, providers, commissioners
and stakeholders. The 2014/15 tariff guidance made clear that
commissioners 'should have regard to the national tariff efficiency
and cost uplift factors for 2014/15'[5]
and that prices could be locally determined. For 2015/16, mental
health will be prioritised so that alternatives to block contracts
can be established and greater parity between the mental health
and acute health payment mechanisms can be achieved.
By committing to a long-term strategy for the pricing
system we will be able to undertake the research required to test
theories and work through policies so that any changes do not
have a destabilising effect. Those working in the health system
will be able to contribute to and have sight of our decision making
and the conclusions we reach.
We have established working forums with NHS England
in relation to pricing and will be publishing a joint long term
strategy for pricing by October 2014. This will include our findings
on financial and non-financial incentives to improve Tariff and
our findings on introducing multi-year tariffs. We will provide
the Committee with an update on progress by the 30th
of June 2014.
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)
Evidence on 'cherry picking' is largely anecdotal
and not necessarily conclusive. However, we are alive to the
issue and the planned redesign is oriented to creating a pricing
system that has greater sophistication than has previously been
achieved. For example, there is work on-going to design a currency
for elective care that can better differentiate patients with
complex co-morbidities which will be available for use in the
2016/17 national tariff.
We will be using our Tariff Enforcement powers to
ensure there is a consistent approach in approving or declining
requests for modifications from the National Tariff, which should
reduce any 'cherry picking'. We will be reviewing the systematic
cost differences in acute care which result in applying a Market
Forces Factor or allowing 'Specialist Top Ups' to some providers
and establishing policies to improve Tariff.
Competition and integration
The Committee recognises however that many new
commissioning organizations 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)
Throughout March and April we completed a programme
of 10 events for commissioners across the country to promote understanding
of the Procurement, Patient Choice and Competition Regulations.
More than 230 people attended the events including representatives
from 71 Clinical Commissioning Groups. Attendees were talked
through the Guidance, given the opportunity to discuss case studies
and ask questions. Feedback from attendees was positive with:
· 80%
saying that they have a clear understanding of Monitor's role;
· 96% reporting
a fairly or very high understanding of choice and competition
in healthcare; and
· 88% reporting
a fairly or very high understanding of the Section 75 rules after
attending the events.
We are currently identifying those CCGs who have
yet to engage with us on the application of the commissioning
regulations so that we can establish how best to communicate with
them. We are also looking at the feedback we got at the 10 events
to ensure that we act on it.
A recent roundtable event with commissioners sought
their views on how we might best continue to engage with them
and we are developing our engagement strategy in light of this.
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)
The Competition and Markets Authority (CMA) recently
published NHS Mergers Review Guidance[6]
for consultation. We worked with our colleagues at the CMA to
assist them to produce this and they are awaiting feedback from
the sector to input into the final document.
We have also jointly developed a short guide to NHS
mergers on which we are seeking views from the sector. The guide
will demonstrate how proposals for necessary changes that work
well for patients can navigate the merger review process in a
timely manner so that changes to existing institutional structures
prove no barrier to improving healthcare. Monitor and the CMA
recently jointly hosted a roundtable of providers and their legal
advisers to discuss issues and concerns to ensure the guide is
effective at meeting the needs of the sector. We anticipate publishing
this by July.
We are already seeing the impact of our joint efforts
with the CMA able to clear the proposed merger of Frimley Park
and Heatherwood and Wexham Park NHS Foundation Trusts at an early
stage.
The Committee recognises 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)
We acknowledge that we need to improve our understanding
of the third sector. In the process of launching our provider
licence we worked with colleagues in the third sector to ensure
their understanding of the new regulatory requirement and teams
across Monitor are increasingly working with the third sector
as we deliver our new responsibilities. Further, we have recently
completed a call for evidence on the extent to which the general
practice services sector is working well for patients[7].
Through this we developed a good understanding of the challenges
facing primary care providers and identified a number of areas
for further work that will provide additional opportunities to
improve our understanding in this area.
We will provide the Committee with an update at the
next accountability hearing.
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 evidence:
a) It should launch a review of 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 the necessary service reconfiguration
(Paragraph 107)
As previously stated, we share the Committee's concern
with the adequacy of the previous payment system design and the
incentives it created. We are committed to working with our partners
to address these.
Since taking on competition responsibilities in April
2013 Monitor has been committed to making sure rules operate in
the best interests of patients. We are working with partners,
including the CMA, to ensure there is a good understanding of
how the rules encourage the delivery of high quality care for
patients that represents good value. We are clear that the rules
are not an obstacle to positive change that works well for patients.
We have already held extensive workshops with the
CMA and, where appropriate, other stakeholders to identify and
address issues arising from the application of competition law
to provider restructuring and service reconfiguration. The results
of these workshops are reflected, in part, in our new process
for supporting trusts wishing to merge services that work well
for patients. We will be issuing further guidance on this to
the sector by July.
In light of our intention to ensure that new processes
work as they are intended to, we will undertake a review of their
effectiveness. We will do this after around six months or when
sufficient trusts have been supported early in their process of
considering a merger, whichever is the sooner.
2 Monitor (April 2014). Monitor's strategy 2014-17:
Helping to redesign healthcare provision in England, London,
Monitor, p12. Back
3
Monitor (April 2014). Monitor's strategy 2014-17: Helping to
redesign healthcare provision in England, London, Monitor. Back
4
Comptroller and Auditor General (February 2014). Monitor:
Regulating Foundation Trusts, London, National Audit Office,
p9 Back
5
Monitor (December 2013). 2014/15 National Tariff Payment System,
London, Monitor, p152 Back
6
https://www.gov.uk/government/consultations/nhs-merger-review-guidance
Back
7
http://www.monitor.gov.uk/sites/default/files/publications/GPDiscussionDocFinal_0.pdf Back
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