Feature / Community spirit

In a jointly delivered verdict on the recent NHS reforms, the Audit Commission and Healthcare Commission last month concluded that foundation trusts were still a work in progress. There are clear signs of improvement in financial management and a more business-like approach, but little sign of the development of innovative models of care. New freedoms, such as the ability to borrow for investment, also remain largely unused.

But this hardly seems to be inhibiting the foundation trust bandwagon. With 103 foundation trusts now authorised, including 30 mental health trusts, the movement already accounts for 43% of the current acute and mental health sector turnover.

The aim is for all acute and mental health services to be provided by foundation trusts within the next three years. But those with aspirations for the greater freedoms offered by foundation status reach beyond the acute and mental health sectors.

Community services' providers are increasingly eyeing up the benefits of greater self-rule and those in the vanguard hope to be among the first community foundation trusts authorised some time in the autumn of 2009. Any suggestions that the foundation model is inappropriate for community services are dismissed by those seeking the new status.

Lesley Evans, finance director-in-waiting of a proposed community foundation trust in Birmingham - currently operating as the provider arm of South Birmingham Primary Care Trust - believes that, if anything, foundation trust status may be even more relevant to community services than other parts of the health economy.

'We get 40% of our income from South Birmingham PCT,' she says. 'The rest is from other organisations region-wide and Birmingham wide - so we are not just a provider arm for the local population. But if you look at who is influencing services, then it is predominantly South Birmingham PCT. All our other stakeholders/commissioners should also have a say.

'Our interest in foundation trust status is primarily the governance arrangements. We believe the foundation trust model - with its membership and governors - fits better with community services than it does with acute.'

She argues that with district nurses, health visitors and specialist rehabilitation staff working out in the community, mixing with patients and carers to provide 'person-centred' care, there are already good links into the community. Creating a membership would simply build on these links and provide a formal way of enabling staff and the public to influence services.

She adds that patients are under the community provider's care for long-term conditions - potentially for a lifetime - unlike the acute sector, which is potentially a one-off experience.

But the attractions go beyond governance. The foundation trust freedoms are also a big draw. 'We are financially healthy. [As the provider arm] we have just returned a £1.3m surplus and we are planning a £1.5m surplus this year with heavy investments,' says Mrs Evans. 'We want the ability to reinvest those surpluses for the patients we provide to. But if we are the PCT's provider arm, under the current arrangements, the PCT could have that money back to give to the local acute FT if it had problems with potential overperforming payment by results contracts. Foundation status would give us the freedom to invest our own surpluses for the benefit of our patients and service users.'

This is not a reflection of current circumstances. South Birmingham PCT, for instance, has returned last year's £1.3m surplus to the provider arm for investment. But in more difficult financial times surpluses made by community services could be applied to other commissioning pressures, reducing the direct incentives for community services staff to improve efficiency and reduce costs.

The organisation, whose £134m turnover last year is expected to grow to £150m this year - larger than many existing acute and mental health FTs - is also excited by the prospect of greater borrowing freedoms. Acute and mental health FTs have so far declined this opportunity en masse, with concerns over future funding the most frequently cited excuse. But Mrs Evans believes community FTs would be more likely to make a move. And rejuvenating and developing South Birmingham's large community estate, which includes two community hospitals and a dental hospital, would be a priority.

'The lack of borrowing among current FTs may be because they are acute,' she suggests, acknowledging that investing in changes to big hospital buildings could be challenging given the agenda to move more services into the community. But she believes community FTs would not be affected the same way, potentially using borrowing powers to create the changed patient pathways that would deliver the target of more services in the community.

She adds that community organisations are already familiar with working with Local Improvement Finance Trusts (LIFTs), which have actively sought to address the need for flexibility as demands change.

South Birmingham is one of six community pilots working towards possible foundation status. One of the initial sticking points was the FT regulator Monitor's approach to assessing for authorisation. The usual approach of looking at three years of historic financial figures and five future years (through a long-term financial model) is unworkable as would-be community FTs have no historical track record as free-standing bodies. To get round this, the Department of Health and Monitor have agreed that community organisations will need to operate autonomously for one full year to enable assessment. This means operating autonomously from the governing PCT in terms of governance, finance and relationships with commissioners.

South Birmingham began its 'shadow' year in April. Mrs Evans admits there was a huge amount of work undertaken to be ready for that launch date, perhaps particularly on the finance side. She says that one of the early learning points was the need for someone to lead the exercise on both sides of the organisation - both for the PCT as commissioner and the provider arm. 'I felt this was vital if the board were going to be able to sign-off the work,' she says, adding that the board needed assurance that any decisions - for instance about splitting overheads or dividing the balance sheet - reflected an agreed, rather than partisan, assessment.

A large number of practical steps were necessary. For instance separate governance arrangements have seen the provider adopt the PCT's standing financial instructions, standing orders and scheme of delegation as a first step to reviewing these key documents during the coming year. A board has been created, taking over from an informal board that had already existed as part of moves to separate out commissioning and provider activities. The PCT non-executive directors (NEDs) that sat on this provider board have initially taken places on the shadow community trust board, but separate non-executives are being appointed to sit alongside the board's newly appointed chairman, Paul Davis. 

A training programme, aiming to familiarise NEDs with the FT regime and concepts such as EBITDA (earnings before interest, taxation, depreciation and amortisation) has already commenced. Mrs Evans has been in post as associate finance director at the PCT (but overseeing the move to FT status) since late 2006, as has a managing director, Tracy Taylor  - the FT chief executive-in-waiting.

Separate bank accounts have been set-up and ledgers and balance sheets have been split. The new opening balance sheets will be audited by an externally appointed accountancy firm. Mrs Evans says there is a still a lot to do and it is not all straightforward or easy. The organisation may be operating autonomously but it is still governed by PCT rules.
For instance, the PCT has to draw down cash at the end of the month because it is not allowed cash balances. Yet this is at odds with the assessment of working capital for FTs, which assesses access to cash to cover operating expenses. 'While we have asked the Department to allow the pilot provider arms to hold cash, in the meantime we have to run two cash models - one as part of the PCT and one that reflects what our cash position would have been as an FT,' she says.

A new structure in the provider organisation has been devised around three divisions:

• Specialist markets (including learning disabilities, dental services and specialist rehabilitation)
• Adults and communities (including district nursing, community hospitals, some rehab)
• Children and families.

Driving improvement

Board reports have been reworked to reflect the standards and risk ratings used within the FT sector. And the organisation has started to think about how it will drive improvement in future.

Key to this will be a move to service-line reporting/management, an analysis of which is now required as part of the application process. Mrs Evans acknowledges that while some acute trusts are finding this challenging, there are particular difficulties within the community sector. So far it has identified some 90 possible service lines and is about to undertake an exercise to produce a directory of services before finalising the right levels at which to report financial information and manage services.

But the data to populate service line accounts is simply nowhere near as developed as in the acute sector. There is no payment by results tariff to identify income to service lines (apart from for dental services) and just some cost and volume contracts for rehabilitation, although cost and volume contracts for community services are being run in shadow form. And like community services everywhere, there are more fundamental problems with counting data. Apart from simply ensuring episodes, visits and interactions are counted in a more comprehensive way (enabling costs to be apportioned to the right service lines), there are some unique problems relating to having commissioning and provision under the same roof.

For instance, as with many PCTs across England, there are instances of district nurses working with GP practices to administer injections on behalf of GPs. This could be contracted as part of the district nurse's contacts, however is it also part of GPs' contractual framework.

'These are clearly aspects that can be really complex and messy,' says Mrs Evans. 'We just have to do it bit by bit and move towards demonstrating that we have value for money. It is all about asking the right questions and taking commissioners with us with all aspects of any developmental work we undertake'.

The provider organisation is currently working with the three Birmingham PCTs to develop a city-wide community tariff with other community providers also due to be involved.

Although 2009 may be the goal for authorisation, Mrs Evans is convinced the benefits will start flowing much sooner. She says the reinvestment this year of last year's surplus is one very visible benefit that has already been secured. She believes the revised governance and reporting arrangements are a step improvement on the previous set-up. And she says that discussions are underway with existing foundation trusts about developing and introducing new and different pathways.

She admits that there is currently some confusion among these potential acute partners - are they talking to one of their principal commissioners or an autonomous peer provider? But she says that full FT status would help remove this confusion. And if the creation of new pathways and enhanced community provision can be accelerated, community FTs are likely to be seen as a major success.

THE JOURNEY SO FAR

Financial separation

• Separate bank accounts
  
• Full restructure of internal coding
  
• Splitting ledgers, payroll, ordering
  
• Restricting access to different sides of the organisation
  
• Review every process
  
• Full internal reporting structure

Board reporting

• FT standards
• Monitor risk ratings
• Training with all board members

Corporate approach to commissioning

• Shadow cost and volume contracting for community services introduced
• Formalised relations with commissioners
• Contracts developed

Financial governance

• Separate audit committee
• Formal meetings with PCT finance director and chief executive

Training

• Financial training for non-finance managers developed
• Board training