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Editor's blog Thursday 1 September 2011: Failure regime for FTs detailed; huge roles for Monitor as 'the new DH'

"Ever tried. Ever failed. No matter. Try again. Fail again. Fail better."
Samuel Beckett, 'Worstward Ho'

It has been a long time coming, and next Tuesday and Wednesday's second reading debate for the recommitted Health And Social Care Bill is very, very near.

But at last the DH has published the proposals for a failure regime for FTs, including Monitor's suggested role in the process.


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The broad principles are that:
• Commissioners would take the lead in securing continued access to NHS services overseen by the NHS Commissioning Board;
• Monitor would intervene proactively with the aim of supporting recovery and preventing providers becoming unsustainable, where possible;
• The previous Government’s unsustainable provider regime for foundation trusts (FTs) established under the Health Act 2009, would be maintained but improved significantly;
• There would be a separate regime for companies that delivered essential NHS services, which would provide equivalent safeguards for patients and taxpayers; and
• The Secretary of State would retain a veto over proposals for securing access to NHS services in the event that a provider became unsustainable. Such a veto would be subject to certain criteria and would be expected to only be used in exceptional circumstances, primarily where either the proposals agreed by the NHS Commissioning Board and/or relevant clinical commissioning groups would fail to secure continued access to services or secure services of sufficient safety and quality or provide good value for money.

The proposals to designate services are being deleted; instead, "the Government proposes that Monitor would support commissioners by intervening proactively where a provider of NHS services gets into difficulty and with the aim of supporting recovery and preventing providers becoming unsustainable, where possible. For example, the amended clauses envisage that where a provider gets into difficulty, Monitor may appoint agents to work with commissioners in drawing-up plans for securing continued access to NHS services. In addition, in the unlikely event of a licence-holder becoming unsustainable, the amended clauses would provide for special arrangements to protect patients’ interests, building and improving on existing legislation for foundation trusts established under the Health Act 2009. In addition, a new health special administration regime would provide similar protections for patients in the event of a company supplying NHS services becoming unsustainable".

These changes aim to "would enable Monitor to use its licensing powers to support commissioners in securing continued access to NHS services".

Clause 104 and P2
A newly-introduced Clause 104 "describes various types of condition that may be included in the licence as standard or special licence conditions. This list is not intended to be exhaustive. The effect of this clause would be to give Monitor discretion in determining where it is appropriate to include standard licence conditions for the purposes of securing continuity of services – that would be applicable to all licence holders – or to apply special licence conditions to individual licence holders, where necessary, on a case-by-case basis".

Meanwhile, "new clause amendment P2 adds to the list of types of conditions that might be included in standard or special license conditions. These additions are to ensure that Monitor can support commissioners effectively in securing continued access to NHS services. The additions would permit requirements on licence holders:
• to provide information to commissioners and other parties as Monitor directs;
• to allow Monitor to enter premises owned or controlled by the license holder; and
• to co-operate with one or more persons appointed by Monitor to assist in the management of the licence holders affairs.

"New clause amendment P2 also requires Monitor to keep under review the level of risk to the continued provision of services, where a license includes conditions for these purposes. The combined effect of these amendments is that Monitor should intervene in proportion to risk and as it considers necessary to restore compliance with licence conditions for the purposes of securing continuity of NHS services.

"New clause amendment P2 also requires Monitor to publish guidance for commissioners on the exercise of their functions in relation to providers whose licences include conditions intended to help protect continuity of services. The amendment requires commissioners to have regard to the guidance".

Mmmm. This is interesting stuff.

Monitor: reinvented as the new DH
It also removes much autonomy from FTs, handing it straight to 'independent regulator' Monitor. If you look at the powers being given to Monitor, they look awfully like the very powers that the Secretary Of State For Health used to have over the entire NHS, carried out via DH and regions / SHAs.

Amendment P51 "removes the restriction that Monitor must ignore its licensing functions relating to securing the continuity of services when considering the imposition of transitional licence conditions on certain foundation trusts".

'The liberated zone' of FT status, in Simon Stevens' phrase, just started looking a whole lot less liberated.

One can argue that this is a manifesto for stability (although former NHS CE Lord Crisp's interventions in the debate about acute over-provision re-make the point that stability is not necessarily what all providers need).

Equally, one can argue that Monitor has a whopping great vested interest in preventing the falling-over of trusts it has licensed.

More to the point, this market-making (and -supporting) function is a curious transitional role for the would-be NHS economic regulator to undertake.

The 'bung formula'
The existence of 'bungs' (bribes, in football parlance) to sustain economically unviable services are one of the worst-kept secrets in NHS finance. Identifying and proving them has, however, not been straightforward.

Another newly-minted job for Monitor is to create a 'bung formula': "a provider of NHS services may be eligible for an increase on the prices payable under the national tariff to recover any unavoidable additional costs of delivering the services that need to be continued, where this would otherwise be uneconomic, and in line with a methodology agreed between Monitor and the NHS Commissioning Board. This methodology would be used to determine:
• whether the price modification is necessary; and
• the level of the price modification if it is needed.

"Amendment P74 places a duty on Monitor to publish a methodology, to be included in the national tariff document, which will be used to assess the application for a price modification under clauses 127 and 128. Amendment P75 allows the national tariff to include guidance on the application of this methodology. Amendments P77 to P83 state that this methodology, and any associated guidance must be agreed by the NHS Commissioning Board (or in the default of agreement, decided by arbitration) and included in the draft national tariff for consultation".

Matters get more lively, as "Amendments P84 to P95 make the price modification process work after the changes to the continuity of services regime to remove designation. They open out the regime so it could potentially be applied to any NHS service. Amendments P84 and P85 allow the provider and commissioner to agree a price modification to the national price for any service for the purposes of the national tariff. Monitor would still have to approve the modification using the methodology developed for this purpose (amendment P86). Amendment P87 ensures the Secretary of State is sent notice of the modification and amendment P88 would allow the Secretary of State to block any modification that would breach EU Treaty obligations. Amendments P90 – P94 make the same changes to clause 128 as amendments P83 -P89 do to clause 127, where a provider can apply to Monitor for a price modification without commissioner agreement".

If I understand this correctly, then commissioners and providers can agree to vary the national tariff subject to Monitor's approval of which the Secretary Of State must be notified. If the SOS considers that the plans would breach EU treaty obligations (presumably those regarding state aid), he can block them.

The last bit is the really interesting one: it suggests that providers can ask Monitor to vary a tariff price without the consent of their commissioner.

That is worth repeating: providers can ask Monitor to vary a tariff price without the consent of their commissioner.

The National Hospital Service strikes back against the concept of a commissioning-led NHS.

Failing worstward
The FT failure regime is summarised as follows:

"The continuity of services regime for FTs would be based on the existing regime established under the Health Act 2009. However, the Government would make a number of improvements: ensuring that FTs to do not revert to being under Ministerial control by removing the ability to de-authorise an FT; replacing the Secretary of State decision making role for FTs with a revised role for Monitor; and at the same time ensuring democratic accountability by setting out a Secretary of State veto process. As a result of the amendment, the regime would be more independent and transparent, reducing unnecessary costs and delays, with additional safeguards for patients and taxpayers.

"Commissioners would be under a duty to meet patients’ reasonable requirements for NHS healthcare services, including in the event of a provider becoming unsustainable . In this event, they would be required to identify where the withdrawal of services would have a significant adverse impact on health or would significantly increase health inequalities; or would cause a failure to prevent or ameliorate either damage to health or a significant increase in health inequalities; and, there are no alternative providers of services for patients to access. In determining whether the criteria were met, commissioners would have to have regard to current and future healthcare needs and any significant impact on equality of access to services.

"As a last resort, in the unlikely event where previous interventions had been unsuccessful and a provider became unsustainable in its current form, Monitor would trigger the “continuity of services” regime and appoint a suitably qualified person (“administrator”) to take control of the provider’s affairs. The administrator would prepare a draft report to Monitor, recommending how to secure continued access to services, in line with requirements determined by the commissioner. The administrator would be required to agree the report with the commissioner, before the 30 working day public consultation can start, where the views of patients, the public, staff, Health and Wellbeing Boards, local Healthwatch organisations and anyone else Monitor deemed appropriate would be sought. Any changes to the report in light of responses to the consultation would also need to be agreed by the commissioner. The administrator would then submit a final version of the report to Monitor.

"Before Monitor decided what action to take in relation to the services, it would need to be assured of the clinical case for any change. On receipt of an order appointing an administrator to a foundation trust, the Care Quality Commission would provide an assessment of the provider’s current service provision, to identify any concerns over quality and patient safety, and would expect the Trust Special Administrator (TSA) to:
• secure endorsements from local clinical commissioning groups (or the NHS Commissioning Board, if appropriate) and where possible, secure endorsements from relevant Clinical Senates and/or clinical advisors on the clinical case underpinning the recommended solution; and
• consult the Independent Reconfiguration Panel on any proposals for service change.

"Monitor would be required to submit its final report and proposals to the Secretary of State, who would have a right of veto, where he could demonstrate, either:
• failure by the TSA to follow due process; or
• failure by the NHS Commissioning Board, and/or the relevant clinical commissioning groups to secure continued access to services, or secure services of sufficient safety and quality or provide good value for money".

The Trust Special Administrator (TSA) is to be set the task "of securing the continued provision of NHS services in line with requirements determined by the commissioner and where withdrawal of a service would, in the absence of alternative arrangements, either:
• have a significant adverse impact on the health of persons in need of service, or significantly increase health inequalities; or
• cause a failure to prevent or ameliorate either a significant adverse impact on the health of such persons, or a significant increase in health inequalities.

"In making a determination for these purposes, commissioners would have to have regard to:
• the current and future need for the provision of NHS services; and
• any matters specified in guidance published by Monitor (on applying the criteria), where such guidance has been approved by the Secretary of State and the NHS Commissioning Board.

"The NHS Commissioning Board would be responsible for facilitating agreement between commissioners in determining requirements for securing continued access to services in individual cases The NHS Commissioning Board would make the decision where commissioners failed to reach agreement ... Once Monitor has made an order to appoint a TSA Amendment P151 requires the Care Quality Commission to provide Monitor with a report on the safety and quality of NHS services that the Trust provides.

"Monitor would have power to establish a financial mechanism to fund the operation of administration once a provider became unsustainable. If Monitor deemed it appropriate, it would be able to establish and maintain a risk-pool, with power to levy contributions from providers and (subject to regulations) commissioners. This risk pool could be used to fund the operating costs of maintaining services during administration and one-off costs of restructuring".

The Southern Cross clause
As the possibility of a double-dip recession increases, it was fun to spot the 'Southern Cross Clause': "1.4.2 Health special administration - Under the Government’s revised proposals health special administration will not apply to FTs, only to companies (which includes public limited companies, private limited companies, community interest companies, companies limited by guarantee and unregistered companies).".

Investors, including private equity firms, might want to have a careful read of that one.

Monitor's transitional powers
"Amendments P3-P5, P49-P50, P69-P73, P243 and P246 extend the transitional period where Monitor retains specific intervention powers over foundation trusts until March 2016. They also make all foundation trusts subject to these powers. ... Extending the powers would, as recommended by the NHS Future Forum, give the governors’ time to build capability in holding their board to account. Through these powers Monitor would also be able to protect the taxpayers’ investment in foundation trusts.

"New clause P3 (Duration of transitional period) extends the transitional period where Monitor retains specific intervention powers over all foundation trusts until March 2016".