News / Licence concerns must be 'nipped in the bud'

By Seamus Ward

Monitor must nip in the bud growing fears that its proposed licensing regime for healthcare providers will be onerous and unnecessarily costly, NHS Confederation chief executive Mike Farrar has said.

The Health and Social Care Act was given royal assent on 27 March, confirming that Monitor will become an economic regulator. Its new powers will include giving licences to providers (both NHS and independent sector) and it has been consulting on licence conditions in six areas, including pricing, continuity of services and governance and financial oversight.

Mr Farrar praised the regulator for engaging with stakeholders ahead of the formal consultation, which will go ahead now that the legislation has been passed. But he warned fears were growing that licensing could be too bureaucratic.

'We are convinced that a specialist sector regulator can be right for the NHS in theory, but the jury is out on whether it will be so in practice. Monitor needs to nip in the bud serious concern that the potential benefits will not materialise and that the costs will be disproportionate. It has to add value, not detract from it,' he said.

He warned the current proposals looked onerous, particularly for smaller providers, and could stifle innovation and service redesign.

Mr Farrar said the biggest concern in the proposed licensing regime was the cost of complying with conditions designed to ensure the continuity of mandatory services where a provider runs into financial trouble. Monitor will hold a risk pool, funded through a risk-based levy of licensees, to pay for the administrative costs where a provider fails.

'Funding the extra licensing fees, compliance costs and administrative requirements will prove difficult for many providers. We particularly question the plans for all providers to have a risk rating from a credit rating agency, as the costs could be high,' he said. 'The idea that only a small number of licensees will become financially distressed looks extremely optimistic. We believe many providers and commissioners will experience financial pressures so it is critical to get this right.'

Monitor and the NHS Commissioning Board should give commissioners practical help, not tell them what to do. And the regulator must work with the Care Quality Commission to eradicate duplication and reduce costs.