News / LATEST: Regulation overhauled

Monitor will work closely with the NHS Commissioning Board as it discharges its new responsibilities as an economic regulator, including setting maximum prices, according to a consultation paper issued by the Department of Health.

But while ‘Liberating the NHS: regulating healthcare providers’ sheds some more light on the government’s plans, questions remain about the division of responsibilities between the two organisations. There could even be a role for a third body – the NHS Information Centre, which a separate consultation document also published on 26 July suggested would become the central depository for NHS data, with primary responsibility for collecting data and assuring its quality. It is unclear whether this could extend to data collection and quality assurance of reference costs.

Monitor and the NHS Commissioning Board will work together to decide which services should be subject to national tariffs. The development of currencies for pricing and payment will also be a joint responsibility, though the commissioning board will have primary responsibility for determining currencies.

The document hinted Monitor could set longer-term tariffs. ‘Up until now, the secretary of state has been responsible for setting these prices on an annual basis. In other sectors, government has delegated responsibility for price setting to independent economic regulators. Such bodies can create a more stable environment and greater regulatory certainty so that providers have the confidence to make long-term investments in services,’ it said.

The regulator will have a duty to make best use of NHS and social care resources, though the commissioning board and local commissioners will have primary responsibility for managing within resource limits.

The economic regulator would develop a methodology for pricing, consulting on this publicly with the commissioning board and providers. The consultation document said the tariff-setting process should be transparent and open to scrutiny. It added that, as at present, the methodology must take account of inflation. However, over time, ‘the tariff will be adjusted on a bottom-up basis to reflect increases in provider efficiency.’

Both the commissioning board and providers will be able to challenge the methodology used in Monitor’s pricing decisions through appeals to the Competition Commission, though the Department acknowledged the need to avoid perverse incentives to make ‘vexatious or trivial complaints’.

Monitor will be able to alter tariffs in exceptional circumstances. The consultation said this might be needed on rare occasions to sustain services – for example when providers have unavoidably higher costs the regulator could increase tariffs. However, in doing so, the regulator would have to pay heed to a number of duties – to protect patients and the public through competition where appropriate and regulation where necessary, to promoting efficiency and to European Union rules (ensuring providers do not gain an unfair competitive advantage or the tariff change does not constitute unlawful state aid).

The consultation also asks whether the government should forge ahead with its plan to repeal the cap on foundation trust private income and whether statutory controls on foundation borrowing be retained or removed. It also asks how legislation can be changed to make it easier for foundations to merge or acquire another FT. In future, the Office of Fair Trading and the Competition Commission will be in charge of regulating mergers and acquisitions between foundation trusts.

Commissioners and providers will be able to apply to Monitor to set a differentiated price or arbitrate in pricing disputes. However, it must consult the commissioning board on plans to vary tariffs in individual cases.

Monitor will also have powers to promote competition and prevent anti-competitive behaviour. It will be free to conduct market reviews where competition is not functioning properly, advising government and the commissioning board on the changes needed. Monitor will have powers to investigate and remedy complaints regarding commissioners’ procurement decisions, or other anticompetitive conduct, acting as arbiter.

Continuity of services will be ensured with the creation of a new ‘additionally regulated services’ category, building on mandatory services in the current system by setting conditions for additionally regulated services in providers’ licences. There will be a special administration regime for additionally regulated services in cases where providers become insolvent.

The consultation also proposes Monitor’s regulatory activities should be funded by charging fees to those it regulates.