Monitor: regulating NHS foundation trusts
4 Jul 2014 02:49 PM
The Public Accounts
Committee's Sixth Report of Session 2014-15 is published as HC
407.
The Rt Hon Margaret Hodge MP,
Chair of the Committee of Public Accounts, today said:
"These are tough times for
the NHS. The number of NHS foundation trusts in difficulty is growing, and this
casts doubt on Monitor’s effectiveness as their
regulator.
Over a quarter of foundation
trusts, 39 out of 147, were predicted to be in deficit at the end of
2013-14, evidence of the increasing financial challenges they are
facing.
By December 2013, 25 trusts
– one in six – were in breach of the conditions set when they were
awarded foundation trust status.
These trusts are suffering from
serious financial pressures, poor leadership or both, and some have been
allowed to go on struggling for more than four years.
Monitor has got to get much
better at identifying and taking radical action in trusts at risk of failure.
However, its effectiveness is undermined by a lack of frontline NHS
experience.
Only 7 of Monitor’s 337
staff have a clinical background and only 21 have experience of running or
working in a hospital trust, which damages Monitor’s credibility and
ability to diagnose problems and develop solutions.
It is currently spending
£9 million a year out of its £48 million budget on consultants to
fill gaps in expertise.
At the same time Monitor’s
remit is expanding beyond protecting NHS foundation trusts from failure. It now
has a wider duty to protect and promote the interests of patients and a role in
ensuring the continuity of essential health services.
This creates a risk of actual or
perceived conflicts of interest. For example, in setting prices for NHS-funded
care, Monitor will need to balance its responsibility to support the financial
viability of NHS foundation trusts with the objective of promoting more care
outside hospitals in the community in the interests of
patients.
Monitor must demonstrate how it
will prioritise the protection of patients’ interests above those of NHS
foundation trusts, to allay concerns that its new responsibilities are
conflicting.
It must also demonstrate how it
will build up the skills and capacity internally and within trusts to provide
the quality of staff and leadership needed to take the NHS forward in these
difficult times."
Margaret Hodge was speaking as
the Committee published its 6th Report of this Session which, on the basis of
evidence from Dr David Bennett, Chief Executive, Monitor and Una O’Brien,
Permanent Secretary, Department of Health, examined the subject of Monitor:
regulating NHS foundation trusts.
The number of NHS foundation
trusts in difficulty is growing, casting doubt on Monitor’s effectiveness
as their regulator. At the time of our hearing Monitor estimated that 39 of 147
foundation trusts would be in deficit by the end of 2013–14. At 31
December 2013, 25 trusts (one in six) were in breach of the conditions set when
they were awarded foundation trust status. These trusts were in financial
difficulty, or had inadequate governance arrangements, or both, and Monitor
expects the problems to grow. Some had been in breach of their regulatory
conditions for over four years. Furthermore there are potential conflicts
between Monitor’s traditional role of regulating NHS foundation trusts
and the new responsibilities it has been given in the health sector. At present
Monitor relies heavily on consultants and it is not clear whether the
organisation can build the capacity to carry out effectively its expanded
remit. Responsibility for overseeing the provision of healthcare is fragmented,
and there is a strong risk of regulatory overlaps and gaps between
Monitor’s role and those of other bodies, including the Care Quality
Commission, the NHS Trust Development Authority, NHS England and the Department
of Health.
Conclusions and
recommendations
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.
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
stage.
Recommendation:&
nbsp;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.
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.
Recommendation:&
nbsp;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.
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:&
nbsp;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.
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.
Recommendation:&
nbsp;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 of staff.
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.
Recommendation:&
nbsp;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.
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:&
nbsp;The Department should review its regulatory, oversight and monitoring
arrangements to ensure it eliminates duplication and fills any potential
gaps.
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:&
nbsp;The Department should set out how it intends to meet the objective of all
NHS trusts achieving foundation trust status.
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.
Recommendation:&
nbsp;The Department should appoint a permanent non-executive Chair of Monitor
through an open, competitive process by the end of 2014 at the
latest.