News / Liberating the NHS: Legislative framework and next steps: A quick guide

The coalition government has issued its response to this summer’s consultations on its Liberating the NHS white paper and associated documents (Commissioning for patients; Local democratic legitimacy in health; and Regulating healthcare providers). A further response to the Transparency in outcomes consultation is due to be released soon. The following represent the key points in the latest publication relating to commissioning and the regulation of providers.

Changes to original proposals

• Longer, more phased transition for provider reforms. Monitor to retain some of current controls over foundation trusts while new regulation system is introduced.
• Strengthen role of health and well-being boards in local authorities.
• Create a clearer, more phased approach to introducing GP commissioning using pathfinders.
• Require all GP consortia to have a published constitution.
• GP consortia to commission maternity services with national support.
• Give GP consortia a stronger role in supporting NHS Commissioning Board.
• Monitor and NHS Commissioning Board to work jointly in setting prices, rather than have Monitor decide and the Board able to appeal.

NHS Commissioning Board

Outcomes framework and guidance

• The Board will be under a duty to issue guidance on commissioning to GP consortia, which could include guidance on duties around public and patient involvement. (2.14)
• The Board, once it is running in shadow form in 2011, will negotiate levels of ambition for each of around 50 outcome indicators (arranged in five domains). These will be agreed with the health secretary in time for the NHS outcomes framework to be used to hold the Board to account from 1 April 2012. (3.24)
• The Board will commission NICE quality standards to help standardise best practice. The standards will be used by the Board to ‘design the other levers and incentives for improving outcomes in the system’. (3.29)
• The Board will use a commissioning outcomes framework to hold GP consortia to account for improving outcomes. Failure to achieve a minimum level of performance could trigger an intervention by the Board. (3.32)
• The commissioning outcomes framework will have a strong focus on patient reported outcome measures (PROMs) and patient experience, as well as progress in reducing inequalities. (3.33)
• The Board will develop high level commissioning guidance for GP consortia including evidence and good practice on pathways, standards, outcome measures, currencies and contracting. (3.34)

Incentives

• The Board will have primary responsibility for designing the pricing structure, while Monitor will have primary responsibility for setting price levels. (3.37)
• The Board will have a range of payment incentives at its disposal including: the quality and outcomes framework (QOF) for GPs; and CQUIN (commissioning for quality and innovation) schemes. CQUIN schemes will be developed by both the Board and GP consortia with providers.

Relationship with GP consortia/accountability

• The Board will be ‘less of a hierarchical performance manager than a quasi-regulator of commissioners, operating on the basis of clear and transparent rules, within well defined statutory powers’. The Board will not have a general power of direction. (4.51)
• The Board will hold consortia to account for the quality outcomes they achieve and for financial performance. (4.52)
• Board will establish GP consortia and have the power to assign GP practices to consortia to ensure coverage across the whole of England. (4.53)
• The Board will allocate commissioning budgets to consortia and have powers to enter into financial risk-pooling arrangements with consortia on the commissioning side.
• The Board will develop model contracts and standard contractual terms for providers. (4.54)
• The Board will be free to determine the ‘optimal configuration of its sub-structures’.

Finance issues

• The Board will prepare a consolidated annual financial account of all consortia, which will form a key element in the Department’s overall resource account. (4.64)
• The Board will give directions to consortia on the form and content of the accounting information it requires and the timetable (in line with the Department’s specification to the Board). (4.65)
• The Board will have powers to establish and maintain a risk pool with consortia, to issue guidance to consortia on financial risk management and to intervene where there is a significant risk of financial failure. The Board will also be able to adjust consortia allocations in future years to reflect previous overspends or underspends (similar to current PCT allocations). It will operate a ‘clear and rules-based system’. (4.67)
• The Department is working with strategic health authorities in areas where PCTs have debts with the expectation that any debt will be ‘fully resolved’ by the end of 2012/13.
• The Board will have powers and responsibility for designing systems to incentivise good financial management and manage financial risk. It will hold a central contingency to manage volatility such as the fluctuation in demand for low-volume, high cost treatments. (7.27)

Establishment of consortia

• The Board will have responsibility for authorising GP consortia. Before granting an application it will need to be satisfied that: the consortium has a satisfactory constitution, an appropriate area, and that it has made appropriate arrangements to discharge its functions. In particular this will include arrangements for managing financial resources, improving health outcomes, involving patients and professionals, and acting in partnership with local authorities. (4.140)

GP consortia

Structures and governance

• GP consortia will not recreate PCT boundaries (4.18) and membership will be allowed to flex so that consortia can expand, contract, dissolve or merge (4.19).
• GP consortia will need to serve a defined geographic area to discharge some responsibilities such as accident and emergency services. But not all practices in a consortium will have to be physically located in that area. Drawing practices from numerous disparate places will not be viable. (4.21)
• The only size criteria for consortia will be if the Board is satisfied that they have made appropriate arrangements to discharge their functions and that that they have an appropriate area. (4.24)
• Consortia will secure support by employing staff (‘including the many excellent staff currently working in PCTs’), buying in support from external organisations or collaborating with local authorities. (4.26)
• Governance arrangements will be ‘clear and transparent’, but different styles of governance will suit different organisations. (4.29)
• Each contract holder will nominate a clinician to represent it on the consortium (4.30).
• The accountable officer can be either a member or employee of the consortium or a member or employee of one of its GP practices. There will be no requirement for the accountable officer to be a GP or clinician, although the Department of Health anticipates that most consortia would want to take this route. (4.31)
• ‘Whether or not the accountable officer is a GP or other clinician, consortia might also choose to have an executive post (such as chief operating officer) with specific duties for ensuring effective management systems. (4.32)
• Requiring a each consortium to have a statutory management board would be ‘over prescriptive’ and legally requiring lay or patient participation in the governance of consortia is ‘unlikely to work’, although this involvement will not be discouraged. (4.37)
• Consortia will have to publish constitutions (which will be submitted as part of applications for establishment) setting out their arrangements for discharging their statutory functions and procedures for decision making and managing conflicts of interest.
• GP consortia will be under a ‘clear duty to ensure their expenditure does not exceed the commissioning budgets allotted to them’.
• All primary medical contract holders will have a duty to be a member of a consortium.

Incentives

• Only a subset of the indicators in the commissioning outcomes framework will be used to inform the proposed quality premium for GP consortia (4.72) but there will be further discussion around creating the right incentives.
• Investment decisions will be taken under a clear set of rules and guidance on the basis of ‘assumed responsibility’ rather than ‘earned autonomy’.

Roles and staffing

• GP consortia will commission maternity services with support from the NHS Commissioning Board. (4.99)
• The Health Bill will set out the statutory duties for consortia. An accompanying document will set out the main groups of duties and powers that consortia will have with examples of activities that consortia may carry out to fulfil these duties.
• GP consortia pathfinders will test out design concepts for GP commissioning and help identify what commissioning support consortia may need and how it should be provided. (4.125)
• During 2011/12, emerging consortia will work with PCTs to identify where PCT staff could be transferred to fill posts within the new structures, how they will fill other posts and what external support is needed. They will also identify partnership agreements with local authorities, such as pooled budgets and lead commissioner agreements that will transfer to consortia. (4.131)
• The Department wants to strike a balance between retaining essential talents and capabilities of SHA and PCT staff and giving freedom to consortia to innovate. While consortia will have the final say, the Department anticipates that ‘a number of PCT staff across all grades will be essential in providing consortia with the skills and knowledge required to take on their commissioning role’.

Management and administration costs

• Clear administration cost controls will be essential in reducing the total cost of administration from £5.1bn in 2010/11 to £3.7bn by 2014/15 (4.134).
• Separate control totals will be set for NHS Commissioning Board administration spend and consortia will face a ‘pound per head of population’ control figure (4.135).
• The total running costs of the NHS commissioning system will be in the range of £2.3bn to £2.7bn a year from 2013/14. (7.39)

Establishment of consortia

• A comprehensive system of GP consortia will be in place from April 2013. However the Bill will enable consortia to be established in 2012 before taking on full statutory responsibilities in 2013. Where consortia are not ready to take on full statutory responsibilities by 2013, the Board may establish the consortium but specify conditions about how it will discharge its functions (4.141,4.142).

Monitor/Foundation Trusts

• There will be a longer more phased transition period for provider reform. For example some of Monitor’s current controls will be retained over foundation trusts (FTs) while the new system is introduced.

Governance

• FT governors’ duty to hold the board of directors to account will be made explicit (6.15).
• FTs will be required to hold an annual general meeting for its membership, at which members would be able to discuss the trust’s annual report and accounts. FTs will be required to report on directors’ pay and the expenses of directors and governors (6.15).
• Staff-only membership models will not be taken forward (6.17), although a ‘right to provide’ is being explored for staff working in NHS trusts and FTs will be encouraged to consider similar requests from their staff (6.18).

Taxpayer investment

• An ‘operationally independent banking function’ will manage the Department of Health’s £24bn investment stake (public dividend capital) in FTs. The new banking function will also be responsible for managing new public lending to FTs, taking over from the Department’s existing FT Financing Facility. The health secretary will no longer have the power to give grants to FTs – only repayable loans made on commercial principles will be permitted (6.24, 6.25).
• The Department will have the power to collect directly FT forecast spending data so it can manage the overall budget for the NHS. (6.27)
• The health secretary will have powers to define accounting and reporting requirements for FTs.

Borrowing

• Statutory limits on FT borrowing will be abolished. ‘The new system of economic regulation with stronger incentives and a credible risk of failure – will promote financial discipline and prudent borrowing.’ (6.30)

Private income

• The private patient cap will be removed (6.34) but FTs will have to produce separate accounts for their NHS and private services to improve public scrutiny (6.35).

FT pipeline

• A work programme for the pipeline will be published in early 2011 mapping out the trajectory of work to meet the 2014 deadline. The programme will include turnaround teams to support efficiency programmes, regional facilitation of health economy reconfigurations, robust performance management on key indicators, mentoring support as well as options such as mergers, acquisitions or management franchising. (6.39)
• A transitional Provider Development Authority will be established to provide dedicated support for the 120 organisations yet to become FTs. It will operate until 31 March 2014. (6.40)
• 31 March 2013 will be the final date to apply to be a stand-alone FT. Where credible plans cannot be agreed, the health secretary may apply the trust administration regime introduced by the Health Act 2009. (6.41)
• The power to deauthorise a failing FT and return it to NHS trust status will be removed and a specific date (2014) will be specified for repealing the NHS trust legislation. (6.42)
• From April 2012, authorisation will be a one-off test for new applicants with FT terms of authorisation becoming obsolete as the new licensing regime begins. (6.43)

Intervention

• Monitor’s intervention powers will, where possible, be removed in April 2012, when it takes on its new economic regulator role (6.44). But Monitor will retain temporary intervention powers for new FTs authorised after 2012 and for a defined subset of existing FTs. These transitional arrangements will be linked to licensing conditions and will end no later than March 2014 or two years after the the FT’s authorisation date, whichever is later. (6.46)

Economic regulation

• Monitor will have three core functions: promoting competition; setting or regulating prices; and supporting the continuity of services. It will also have the power to license providers of NHS funded care. (6.55)
• Monitor will have enforcement powers including being able to fine providers for failing to comply with licence conditions and possibly the power to suspend or revoke a licence for failing to comply with conditions. (6.66)
• Monitor will levy fees to cover the costs of licensing. But these fees will only be able to be used on licensing related functions. Monitor’s other regulatory activities will be covered by grant-in-aid funding from an allocation agreed with the Treasury. Registrar activity costs will be recovered from those on the register.

Competition

• Monitor will have concurrent powers with the Office of Fair Trading to apply the Competition Act 1998 in health and social care services. However initially these powers will be for healthcare only, with social care being phased in later.
• The OFT and the Competition Commission will be the sole organisations with responsibility for investigating mergers in health and social care services from 2012. (6.92)

Price setting

• Monitor will have to have regard to the overall financial envelope within which the NHS must operate when setting prices (6.104).
• The NHS Commissioning Board will not now be able to appeal pricing decisions by Monitor. Instead there will be a joint process for setting prices, with Monitor and the Board each having primary responsibility for specific aspects of the process as well as the duty to reach agreement at key stages. (6.106)
• The Commissioning Board will have the primary responsibility for developing the pricing structure (6.107) while Monitor will design the pricing methodology (6.108).
• There will be a duty to consult on the pricing methodology at the same time as prices are published (6.109).
• Monitor will have a power to modify prices for services designated as subject to additional regulation (6.110). Where GP consortia are faced with unavoidable extra costs, the Commissioning Board will be able to take such factors into account when constructing the formula for financial allocations (6.111).

Service continuity

• There will be a clear and transparent mechanism for managing provider failure, which protects services for patients but not ineffective management or poor quality care. (6.112)
• A continuity of service regime will give Monitor ‘similar powers to those found in other regulated sectors’ to protect services designated for additional regulation. (6.114) The Health Bill will specify how services designated for additional regulation will be identified.
• The Bill will give Monitor a ‘broad set of legislative intervention powers’ to ensure the continuity of designated healthcare services. (6.122)
• FTs will be brought within the scope of ordinary corporate insolvency procedures and an alternative special administration regime will ensure the continuity of designated services where a provider fails (6.124). The regime will be triggered by Monitor not the health secretary and run by a court-appointed administrator with oversight from Monitor.
• The special administration and insolvency regimes will be introduced in April 2013 if possible or by April 2014 at the latest. (6.127)
• Monitor will have the power to create a risk pool to protect patients’ interests by providing finance to support the continuity of designated services, with providers causing greatest risk bearing a greater share of the costs. (6.130). The pool will only be used for providers in special administration.