Conclusions and recommendations |
1. Monitor was created in 2004 as
the independent regulator for NHS foundation trusts. It determines
whether NHS trusts are ready to become foundation trusts and operates
a regulatory regime designed to ensure that the 147 trusts that
have achieved foundation status continue to be financially sustainable,
well-led and locally accountable. It intervenes where there is
evidence that an NHS foundation trust is in breach of its regulatory
conditions. Monitor's remit is expanding, with significant new
responsibilities, including setting prices for NHS-funded care
jointly with NHS England, and preventing anti-competitive behaviour
by healthcare commissioners and providers. Monitor is independent
of government in terms of its regulatory decisions, but is accountable
to Parliament and the Department of Health (the Department) for
its performance and value for money.
2. Some NHS foundation trusts
have been allowed to struggle for far too long in breach of their
regulatory conditions. It has taken Monitor too long to help
trusts in difficulty to improve, with three trusts having been
in breach of their regulatory conditions since 2009. Trusts may
get into difficulty for a number of reasons. Sometimes the underlying
cause is internal, such as poor leadership, and sometimes the
difficulties relate to wider problems in the local health economy,
such as when local commissioners are in financial difficulty.
Monitor has taken too long to identify clearly the reasons for
trusts being in difficulty, and to take decisive action. It has
adopted an incremental approach to intervention, in the hope that
trusts will recover, rather than taking radical action at an early
Monitor should investigate quickly, to diagnose the underlying
causes of the problems which each trust in difficulty faces, and
then take faster, more decisive action to address them, to turn
around failing trusts sooner.
3. Monitor's job is becoming
harder as more foundation trusts get into difficulty.
In an environment where there is a shortage of good leaders, increased
financial pressures and greater emphasis on the quality of care;
the demands on Monitor will increase. We expect Monitor to
make better use of its resources to drive improvement. At
the time of our hearing, over 26% of trusts were predicted to
be in deficit by the end of 2013-14. At 31 December 2013, 17%
of the 147 NHS foundation trusts were in breach of their regulatory
conditions, up from 11% two years previously. Intervening in these
trusts is resource intensive for Monitor. It does not at present
enjoy the appropriate capacity and skills and relies heavily on
consultants. It is unlikely therefore that it will have the capacity
to maintain its current regulatory approach should the number
of trusts in difficulty continue to rise. It may need to adopt
different approaches to dealing with trusts in difficulty, to
cope with the increasing demands on its resources.
Monitor should evaluate the cost-effectiveness of different
regulatory interventions, and use this information to direct its
work and make the best use of its resources.
4. Monitor's effectiveness is
hampered by a lack of clinical expertise and frontline NHS experience.
While Monitor employs people with financial and business expertise,
it lacks sufficient numbers of staff with experience of running
or working in a hospital trust. Only 21 of Monitor's 337 staff
have an NHS operational background and only 7 have a clinical
background, which damages Monitor's credibility in dealing with
trusts and its effectiveness in diagnosing problems and developing
solutions. Monitor also makes extensive use of external consultants
to fill gaps in its capacity and expertise. However, its use of
consultants has been costly, accounting for some £9 million
of Monitor's £48 million budget in 2013-14. The use of consultants
has also restricted Monitor's ability to build in-house expertise
and knowledge. Both Monitor and NHS foundation trusts face a real
challenge in recruiting the excellent leadership they need to
take the NHS forward in these financially challenging times.
Recommendation: Monitor should
set out how it will: fill gaps in its capacity and expertise;
exploit the skills and knowledge from the consultants it employs;
and develop a staffing model which sets out the balance of clinical,
financial and other expertise it requires.
5. The movement of staff between
the NHS, local government and the civil service is hindered by
the differing terms and conditions of service, limiting the transfer
of skills and knowledge and inhibiting integration. Monitor
presently spend almost one-third of its budget on central services
with 30 individuals employed to work on strategic communications.
Nearly 30 of Monitor's staff are paid over £100,000 a year.
Monitor has struggled to recruit staff with a background in the
NHS, particularly for senior roles. NHS staff cannot transfer
their accrued pension rights and they lose continuity of service
if they join Monitor, as it employs staff on different terms and
conditions based on those in the Civil Service. As a result, the
years of service such staff accrue under the NHS pension scheme
would not be taken into account in calculating the amount of compensation
due if they were to be made redundant by Monitor. Similar barriers
affect staff transfers between the civil service, the NHS and
local authorities, which impedes the transfer of knowledge and
skills between different parts of the health and social care system.
The Department, in conjunction with the Cabinet Office and
HM Treasury, should set out what steps they are taking to remove
disincentives, such as the inability to transfer accrued rights,
to the flow of staff between different parts of the health and
social care system, and to facilitate and encourage the free flow
6. There is a risk of actual
or perceived conflicts between Monitor's role of regulating NHS
foundation trusts and its new responsibilities. Monitor now
has a duty to protect and promote the interests of patients and
a role in ensuring the continuity of essential health services.
This significantly widens its remit into new sensitive areas,
taking it beyond protecting individual NHS foundation trusts from
failure. For example, potential conflicts arise from Monitor's
new role in setting prices for NHS-funded care, and it will need
to reconcile tensions between supporting the financial viability
of trusts and the wider objective of providing more care outside
hospitals in the community in the interests of patients. Similarly,
conflicts could arise from Monitor's new responsibility for preventing
anti-competitive behaviour by healthcare commissioners and providers,
particularly when considering proposals for trusts to merge. It
is not clear how Monitor will assess the impact of proposed mergers
on patients, including weighing up the benefits of potential improvements
in care quality against possible disadvantages, such as longer
journeys or reduced competitive pressure between providers.
Monitor should explain how it prioritises the protection
of patients' interests above those of NHS foundation trusts, and
demonstrate how it does so in practice, to allay concerns that
its new responsibilities are conflicting.
7. There is potential for overlap
between all the bodies responsible for regulating the NHS, including
Monitor, as well as for gaps in oversight. Monitor is increasingly
involved, working with the NHS Trust Development Authority and
NHS England, in health economies facing tough challenges. It is
also engaged with commissioners who are struggling to find an
answer to problems in the local health economy in difficult financial
times. There are therefore at least three national bodies working
closely with the Care Quality Commission and the Department and
with commissioning groups and individual trusts on the same problems.
Recommendation: The Department
should review its regulatory, oversight and monitoring arrangements
to ensure it eliminates duplication and fills any potential gaps.
8. The Department confirmed that
it was still the Government's policy intention that all trusts
should become foundation trusts, but it had not set a target date
for this to be achieved. However, just two NHS trusts gained
foundation trust status in 2012-13 and, as at 31 December 2013,
98 NHS trusts remained.
Recommendation: The Department
should set out how it intends to meet the objective of all NHS
trusts achieving foundation trust status.
9. It is wholly inappropriate
that the same person acted as both Chair and Chief Executive of
Monitor between March 2011 and January 2014. This was contrary
to corporate governance good practice and Monitor's own guidance
to NHS foundation trusts. A non-executive Chair provides an independent
check on the executive by scrutinising performance and holding
management to account. Monitor lacked this important governance
mechanism for nearly three years up to January 2014, when the
Secretary of State for Health appointed an interim Chair who will
serve for up to a year.
10. Recommendation: The
Department should appoint a permanent non-executive Chair of Monitor
through an open, competitive process by the end of 2014 at the