Comment / Licence would require compliance with tariff

Providers of NHS-funded healthcare would have to demonstrate they are compliant with the national tariff and are paid correctly for their services, under proposals put forward by Monitor.

Outlining its early thoughts on the proposed licensing regime that it would operate from October 2012, should government reforms become law, the regulator said particular importance would be attached to recording activity data and correct payments. Under the reforms, Monitor will share responsibility for pricing with the NHS Commissioning Board.

Licensees would be required, as part of their licence, to provide good-quality data. Monitor recognised the need to develop guidance on costing to help licensees maintain data that supports the fair pricing of NHS-funded services.

The regulator has proposed seven chapters (groups of conditions) for the licence, including: pricing; continuity of service; and oversight of foundation trusts’ financial management and governance. The latter will continue until the Department of Health decides foundations are ready to take responsibility for these areas.

The regulator would be responsible for continuity of service in the event of a licensee becoming financially distressed or insolvent. However, the licensing regime aims to prevent this with license conditions that incentivise prudent financial management and increase the transparency of performance and financial risk.

Financial information provided by licensees will be used to monitor financial risk and trigger intervention should the financial position cause concern. It added: ‘Using the system of triggers set out in the licence, we would be able to request more information relating to protected services, possibly more frequently, if providers approach, or show signs of, further financial distress.’

The document sets out four stages of monitoring: normal operations; provider distress (followed by turnaround); provider insolvency; and solution, for example restructuring.

The trigger for moving to the second stage could be a ‘distress test’, such as falling below a minimum financial rating. Failing an insolvency test would see a provider move to stage three.

Between December and March, the regulator will publish draft chapters of the proposed licensing conditions. Its chair David Bennett said: ‘The government’s proposals present an exciting challenge for Monitor and this is the first step in getting input on how we respond to that challenge.’