Feature / Mean machine?
Monitor’s role is about to expand significantly – but what kind of regulator will it be and how will it exercise its new duties? Seamus Ward finds out more
Commissioning has attracted much attention lately. But government NHS reforms will also bring big changes for providers. Within two years most (if not all) will be foundation trusts, there will be greater potential to earn private patient income and, perhaps most significantly, there will be big changes in the way providers are regulated.
Monitor will remain but as a new type of regulator. It is currently concentrating on putting together the elements of its new regulatory machine. And although it’s beyond the stage of working out how the parts go together, there is clearly a lot of work to be done before arriving at the new system.
It will act as a sector regulator, licensing most providers of NHS services, not just foundation trusts (though smaller providers may be exempt). But what does this mean for providers and their patients? And how will the sector regulator differ from the FT regulator?
Some finance managers contacted by Healthcare Finance believe the new Monitor will be much like the old – leading, directing and checking an expanded pool of providers.
‘It will remain very much a key part of our lives,’ says one. But others say it will be much more light-touch, leaving providers to ‘get on with it, until something goes wrong’. There is some truth in both views – and both views have been expressed about the existing regime.
Inside view
Speaking at the NHS Confederation conference in June, Monitor chair and interim chief executive David Bennett said new Monitor would be unique and not like other UK regulators such as Ofwat or Ofgem.
‘Our starting point is our new primary duty to protect and promote the interests of users of the health service,’ he said. ‘That’s fundamental to us and drives everything we do. What we will be doing is quite complex, but at the heart of our job are three things – making sure the right incentives are in place for everybody operating in the NHS to do the best for their patients; making sure information is available to commissioners and providers to deliver the best possible care; and, where necessary, to have in place and in force some ground rules for how people should work in the system.’
The sector regulator will have five main responsibilities: pricing (alongside the NHS Commissioning Board); enabling integrated care; preventing unfair competition; overseeing providers; and licensing (alongside Care Quality Commission registration).
It is consulting on how it will carry out many of these duties (see box). There are consultations on costing and barriers to integrated care, while in July there will be a formal call for evidence in Monitor’s fair playing field review, which examines how it can ensure fair competition for the benefit of patients. Further consultation on proposed licence conditions is due soon – licences will replace the current terms of authorisation and follows initial engagement with stakeholders earlier this year.
Setting prices, promoting service integration and ensuring fair competition are new areas for Monitor. Licensing may feel familiar, but the regime will be different from the current authorisation of foundation trusts.
Although the statutory consultation is due soon, the regulator shared its early thoughts with the NHS and has revised its thinking in some areas. For example, a proposed licence condition that would require providers to have a commercial credit rating has been put on the back burner while research is completed.
Licences will be automatically granted to existing foundations in 2013 based on several principles, many showing its commitment to being a light-touch regulator. It says regulation should only be imposed when there is market failure or sector risk and providers should be empowered to self-govern (a term associated with foundations since their inception).
Monitor’s role of oversight of providers will be most familiar to foundations. At first, the government intended the regulator would have no oversight role at all for existing foundations and would concentrate on newly licensed trusts. But following last year’s Future Forum report, the role was extended to cover all FTs until at least 2016. However, this was changed again as the Act went through Parliament.
Monitor will be able to give FTs a different class of licence with different conditions that can only relate to the governance of the trust.
There are also transitional arrangements that can only be ended by the health secretary. Under these, each FT licence will include conditions equivalent to the measures currently set out in the Compliance framework (broadly speaking, both the financial risk rating and the governance assessment). They will be required to meet indicators of financial health – say, the equivalent of a financial risk rating
of 3 in current terms. If the indicators fell below the required level, Monitor could impose additional licence conditions, such as insisting the trust develop and implement a turnaround plan. If it did not comply with these additional conditions, Monitor could insist directors and governors be removed and/or appointed.
Safety net
‘We act as a safety net for foundation leaders – boards and governors – to make sure they are delivering safe, high-quality care and their finances are sound as they do that,’ Mr Bennett told the NHS Confederation. ‘But if things go wrong and local leadership is unable to deal with it, it is our job to step in. That’s what we do today and what we will be doing in future.’
Under the Health and Social Care Act governors will have a statutory duty to hold boards to account via the non-executive directors. The council of governors will also have the final decision on potential mergers, acquisitions, separations and dissolutions at their trust and on any proposed increase to non-NHS income of 5% or more per annum.
A Monitor spokesman adds: ‘The role of the governors will not replace Monitor’s assessment or compliance functions and Monitor retains the right to replace one or more of the directors and/or governors where a trust is in breach.’
As mentioned earlier, removal of directors or governors would only follow a trust’s failure to follow additional licence conditions.
Governor training
To help FTs equip governors to carry out their new role, the Department is procuring a governor training programme. ‘Finance is likely to be one of the key elements in any such programme,’ says the spokesman.
With plans for providers to have a credit rating dropped for now does this mean trusts will still have a financial risk rating? Monitor has to conduct a risk assessment of providers. ‘We anticipate this will take the form of a risk rating,’ he adds. ‘We will consult later this year.’
Monitor will be able to assist struggling trusts by appointing turnaround specialists or an administrator and will also provide a source of finance to help providers tackle their problems. This will be funded via a risk pool, maintained by a levy of providers and commissioners. The amount to be paid will reflect a provider’s risk of becoming unsustainable.
A trust in serious financial difficulty will enter the continuity of services regime. While commissioners will have primary responsibility for ensuring services continue, the licence will include a list of essential ‘protected’ services that must be available even if their original provider fails. These will be a subset of commissioner-requested services outlined in the licence – services that if withdrawn would have a significant impact on patients. It seems the two lists will be little different.
‘If despite their efforts and ours a provider gets into serious financial difficulty we will have the responsibility to make sure essential services are still provided. As a starting point there is an assumption that nearly all services provided are essential,’ Dr Bennett says.
Foundation Trust Network chief executive Sue Slipman believes the next few months will be crucial as Monitor shapes its licensing regime. She says foundations have problems with the draft proposals as they stand, particularly around commissioner-requested services. ‘If you are running a commissioner-requested service, which is a service you have to offer, you can’t withdraw, no matter how difficult it is to provide that service,’ she says.
‘You can apply for a tariff adjustment, but the problem for public providers is that they are going to have all the services in their terms of authorisation automatically classified as commissioner-requested services. This won’t apply to others, though it will over time.’
Ms Slipman argues this puts foundations on the back foot, limiting their freedom to invest in other services or leverage their assets. ‘They have to keep the asset and pay into a risk pool so that the service will continue should the trust fail. The more commissioner-requested services you provide, the more tied down you will be,’ she says. ‘At a time of huge risk and demand-control measures that are not working, providers are carrying an enormous amount of risk they won’t be free to manage.’
Dr Bennett admits balancing central control and local autonomy will be a challenge. ‘This is something we have to worry about today and there will be even more of that. Another issue to worry about today that won’t go away is finding the balance between risk and the regulatory burden. The more we try to reduce risk at the centre, the bigger the burden we impose on providers.
‘Getting that balance right is very difficult,’ he says. ‘As long as nothing goes wrong, people will want to minimise the burden, but once something goes wrong they will want to know why we took those risks.’
Ms Slipman says there are real concerns about Monitor’s preparedness given the scale of the task before it. ‘They want to get it right but they have been given a difficult task. We will of course help in any way we can.’
Risk regulator
She adds: ‘Monitor wants to be a risk regulator that conforms to the principles of consistency, transparency and accountability. But it’s been given a tough task, particularly around service integration in the context of a competitive market. For that to work Monitor must develop a clear public interest test that is sufficiently robust to stand up in the European courts.’
While she accepts that a sector regulator cannot act as an advocate for providers, it must listen to their message. This will be particularly important as Monitor exercises its role in price setting.
‘The commission will want to drive down prices and Monitor has got to be there, giving clear messages that prices have to be at this level or providers aren't sustainable,’ says Ms Slipman. ‘If providers as a whole are saying “This is risking sustainability”, the system needs to listen.’
Monitor has deliberately set out to consult widely and at length on the shape of the new regulatory regime. Details of its day-to-day operation are still elusive, but the next six months will be crucial as the talking will have to stop, the machine assembled and the power switched on.Current consultations on Monitor's future role
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