The Health and Social Care Bill was introduced to the Commons for its first reading on Wednesday 19 January 2011. Its second reading debate in the House of Commons is scheduled for 31 January 2011.

The reforms detailed in the Bill include far-reaching changes to the way the NHS is to be structured, which will have consequences for patient experience. The reforms have been described by the Government as mutually reinforcing and are professed to make the NHS more responsive and transparent.

The Government's stated aims are to develop an improved culture of openness and greater autonomy and accountability at every level of the NHS. The three key priorities underpinning these reforms are to put patients at the heart of the NHS, focus on outcomes and empower local organisations and professionals.

In this analysis, Wragge & Co's healthcare experts distil the key elements of the structural changes proposed to change the face of the NHS from 2012. Further commentary on discrete aspects of the changes will be published shortly.

It is important to place the Bill in context, as it is not the whole picture. Although the Bill increases understanding of some issues raised by the White Paper, a raft of unpublished secondary legislation is necessary in order to flesh out the practical workings of the Government's policies. Many of the open consultations by the Department of Health will contribute to the development of this level of detail, as will the non-legislative changes that are gaining momentum. These include 'pathfinder' consortia and the 'integration' of Primary Care Trust (PCT) management teams into 'sectors'. Without this missing detail it will be impossible to really understand many of the potential consequences of the reforms.

Streamlining the structure?

For the purposes of this analysis, 'healthcare service providers' means providers of services for the NHS.

Secretary of State

The White Paper promised that 'the headquarters of the NHS will not be in the Department of Health or the new NHS Commissioning Board' and that the reforms would 'liberate the NHS from excessive bureaucratic and political control'.

Rhetoric aside, the Secretary of State will, unsurprisingly, in the proposed new world retain his position as the fulcrum of the NHS. The Bill makes provision for the Secretary of State to give directions to or make regulations in respect of the make-up and functions of the new bodies that will be at the heart of the NHS.

With few clues at this stage as to the extent to which or how these powers will be used, the actual control that the Department of Health will have over the new order is unclear. The Bill does, however, fall short of cutting the NHS adrift from political control.

Those looking for 'liberation' in the Bill will point to section 4 which provides that in exercising his functions in relation to the health service, the Secretary of State must 'so far as is consistent with the interests of the health service, act with a view to securing ... that any other person exercising functions in relation to the health service or providing services for its purposes is free to exercise those functions or provide those services in the manner that it considers most appropriate, and ... that unnecessary burdens are not imposed on any such person'.

From a legal perspective, the effect of this duty to promote autonomy is far from clear and there is a risk that clarification will be left as a matter for the Administrative Court. That the National Health Service Commissioning Board (which has clear regulating functions) is charged with the same duty serves only to muddy the waters.

The proposed duties regarding the reduction of inequalities and improvement in quality of services (which are imposed on the National Health Service Commissioning Board and the commissioning consortia in addition to the Secretary of State) are likewise not clearly defined in the Bill. They therefore also raise the prospect of legal uncertainty going forward.

National Health Service Commissioning Board (the Board)

The headline changes proposed by the Bill include the abolition of the Strategic Health Authorities and Primary Care Trusts, and the creation of the Board and commissioning consortia.

The Board sits between the Secretary of State and the commissioning consortia, taking responsibility for arranging the provision of health services in England, in a role akin to that currently undertaken at a regional level by the Strategic Health Authorities.

Its key responsibilities are:

  • ensuring that each provider of primary medical services is a member of a commissioning consortium;
  • ensuring that the areas of the commissioning consortia do not overlap, and together cover the whole of England;
  • overseeing, through various powers and guidance, the functions of the commissioning consortia; and
  • purchasing services that are excluded from the commissioning consortia's remit and stepping in to purchase services in lieu of commissioning consortia in certain circumstances.

It is notable that the Board may reward consortia which it believes have 'performed well' with a payment. The Bill does not, however, offer any clear guidance as to how the Board should judge performance, although presumably the Board should in this context make reference to its duties to reduce inequalities and improve the quality of services (see above). Nor are there clues as to the potential quantum of such payments.

The Bill provides that consortia may distribute performance payments among their members in such proportions as they consider appropriate. It is not clear whether once distributed in this way such funds may pass to individuals. This may be clarified through the General Medical Services contract between GP practices and the NHS, but what, if any, controls will be placed on the use of these funds by non-GP consortia members? If performance payments are to be a driver for greater efficiency and accountability in the NHS, transparency on this point will be essential.

Commissioning consortia

The White Paper referred to 'GP commissioning consortia'. The Bill refers simply to 'commissioning consortia' and it appears that the dropping of the word 'GP' is more than semantic.

The Bill states that all providers of primary medical services must be members of consortia. Providers of primary medical services are defined in this part of the Bill to include bodies which have contracted with a PCT (or the Board going forwards) for the provision of primary medical services under section 83(2) of the 2006 Act. This opens up the possibility of private bodies becoming members of the commissioning consortia; a significant step from the GP-only regime as set out in the White Paper.

Few practical issues concerning the structure of consortia or commissioning arrangements are clarified by the Bill. It seems that the constitutions adopted by the consortia (to be approved by the Board) and commissioning guidance to be published by the Board, rather than primary or secondary legislation, will be crucial to understanding these important details. The extent to which control may be exercised centrally through contracts between the NHS and healthcare providers also remains unclear.

Uncertainty remains in respect of transitional arrangements on the abolition of PCTs. While the functions and duties of consortia are not strictly aligned with those of PCTs, there will be experience and expertise within the PCTs which consortia may wish to capture.

Healthwatch England

In relation to the public's involvement in the health system, the Bill provides for a committee of the Care Quality Commission to be appointed. This committee will be known as the 'Healthwatch England committee'. Its function (carried out on behalf of the Care Quality Commission) would be to provide information and advice to the Secretary of State, the Board, Monitor and the English local authorities on the views of the:

  • public (including patients) on their needs for, and experiences of, health and social care services; and
  • Local Healthwatch organisations and of other persons on the standards of provision of health and social care services and whether improvements are needed.

The Bill establishes bodies for each local authority area to be known as Local Healthwatch organisations. The Local Healthwatch organisations replace the existing Local Involvement Networks (LINks) and they will be led and supported by HealthWatch England. Their function would be to:

  • report on the above two points for its area;
  • provide advice and information about access to local care services and about choices that may be made with respect to those services;
  • make recommendations to the Healthwatch England committee about special reviews or investigations that should be undertaken. In addition, in some circumstances, it can make such recommendations directly to the Care Quality Commission.

Is Healthwatch England autonomous? The Bill makes it clear that Healthwatch England must have regard to such aspects of government policy as the Secretary of State may direct. In practice, it appears that Healthwatch England with its local counterparts may effectively be the 'eyes and ears' of the Care Quality Commission 'on the ground'. However, to carry out its functions effectively, it will need to ensure transparency and accuracy in its reporting. It will be interesting to see how Healthwatch England ensures this in light of the fact that it must have regard to government policy if so directed by the Secretary of State. Furthermore, it is not clear how the Secretary of State will fulfil his duty to reduce inequalities as there may be conflicts between the health needs of the public in a particular area and government policy as a whole.

Health and Wellbeing Boards

The Bill requires each English local authority to establish a Health and Wellbeing Board for its area.

The Health and Wellbeing Board will consist of at least one councillor of the local authority (or where appropriate, the elected mayor or the executive leader); the director of adult social services; the director of children's services; the director of public health; representatives of the Local Healthwatch organisations for that area; a representative of each relevant commissioning consortium; and such other person as the local authority thinks appropriate.

The role of the Health and Wellbeing Board would be to advance the health and wellbeing of the people in its area by encouraging integration between the different providers of health and social care services. This role is underpinned by its statutory duty to prepare joint health and wellbeing strategies on behalf of the local authority. In the spirit of integration, two or more Health and Wellbeing Boards may work together to carry out their functions.

Public health

There can be no doubt (or hope) anymore - the Health Protection Agency (HPA) is to be abolished. This is clearly stated in Part 2 of the Bill. The Health Protection Agency Act 2004 is to be repealed.

The HPA's functions in relation to biological substances and radiation protection (as provided by the National Institute for Biological Standards and Control and the Centre for Radiation, Chemical and Environmental Hazards, both part of the HPA) are to be transferred to the Secretary of State for Health. The HPA's health functions, which include protection of the community against infectious diseases and other dangers to health and the prevention of the spread of infectious diseases, are also to be transferred to the Secretary of State for Health.

The HPA also encompasses the Centre for Emergency Preparedness and Response, which plays an important role in co-coordinating responses to potential healthcare emergencies. The Bill requires that the Board and each commissioning consortium take appropriate steps to ensure that it is properly prepared for dealing with a relevant emergency. At a local level, each local authority, acting jointly with the Secretary of State, shall appoint a Director of Public Health (as is the case now except the Director of Public Health will be based within the local authority structure rather than as part of PCTs). The Director of Public Health will be responsible for planning for, or responding to, emergencies involving a risk to public health. Although some clarity is provided for responses to health emergencies at a local level, it is not clear how such responses will be co-ordinated at a national level.

The National Institute for Health and Care Excellence (NICE)

NICE for all intents and purposes has been given a new name. It is no longer the National Institute for Health and Clinical Excellence. It is now established as a body corporate, to be known as the National Institute for Health and Care Excellence. What's the difference?

It has already been widely reported that NICE's powers have been curtailed. NICE's power to recommend drugs that should be available on the NHS following a cost/benefit analysis has gone. Having said that, the Bill requires NICE to perform its functions having regard to, inter alia, 'the broad balance between the benefits and costs of the provision of health services or of social care in England'. The Bill confirms the limited functions of NICE mainly to prepare quality standards in relation to the provision of NHS services, public health services or social care in England.

Interestingly, NICE is considered to be an independent body. However, the Secretary of State may direct NICE to prepare quality standards relating to public health or social care services, and the NHS Commissioning Board may direct NICE to prepare and publish quality standards relating to the provision of NHS services. It is not clear how any conflicts arising in the directions given by the Secretary of State and the NHS Commissioning Board to NICE will be resolved.

Last year, the Department of Health told NICE to stop working on quality standards for six public health topics and to pause the work on a further 13 topics on the basis that they were not appropriate topics for NICE to cover. The Bill, quite rightly, does not set out NICE's work programme. Indeed, NICE states on its website that it aims to prepare quality standards on 150 topics over the next five years, yet it only identifies 31 topics. So the answer to whether NICE is independent or not and the nature of its work programme is not as clear cut as hoped.

Monitor

Monitor will become the economic regulator of all healthcare providers (in both the public and private sectors). Regulations may give Monitor the power to exercise functions in respect of adult social care services.

One of Monitor's new objectives is to 'in exercising its functions, promote the economic, efficient and effective provision of healthcare services for the purposes of the NHS'. This reflects the overriding objective of other economic regulators, which must promote competition while protecting the interests of the consumer.

Monitor's remit will cover safety, quality improvement, efficiency improvements, fair access via commissioning, pricing, promotion of competition (for both public and private sectors), best use of commissioning resources, promotion of investment by healthcare service providers, promotion of research by healthcare providers, and the educational and training standards of healthcare professionals. Monitor will also remain the Independent Regulator for NHS Foundation Trusts, although the Care Quality Commission will remain the standards regulator.

All healthcare providers will need a licence to provide healthcare services to the NHS from Monitor, although there is scope in the Bill for exemptions to this requirement in the future. Licensing criteria and conditions will be established by Monitor (subject to approval of the Secretary of State). Monitor is under an obligation to use what it considers to be best regulatory practice to keep a continual review on the level of regulatory burden it imposes on others while exercising its functions. Protection for disproportionate regulatory requirements or action would be available to licensees by way of judicial review, although typically in other sectors the courts will defer to the opinion of an expert regulator on technical matters.

Despite this apparent independence to regulate the market as it thinks best, the Secretary of State has the power to direct Monitor to perform one of its functions where it has failed, or is failing to do so. It is noteworthy that this type of governmental power of direction is not common in other regulated industries, but perhaps health is a special case?

Foundation Trusts (FTs)

The Bill abolishes all (but very few) NHS Trusts in April 2014, so NHS Trusts are expected to become or merge with Foundation Trusts before that date.

The Bill includes various changes to management, governance and constitution arrangements for FTs, including by extending the duties of the Board (now Council) of Governors and the Directors.

The current provisions to limit borrowing powers have been removed, as well as the contentious private patient cap. This will help to ensure a level playing field for all FTs. Regulatory best practice would suggest that non-statutory measures to promote competition (while protecting patient interests) will be addressed via Monitor's licensing role. These include safeguards to reduce cross-subsidies and requirements to ensure transparent accounting of private patient income.

Importantly, the Bill addresses the consequences of an FT failing, giving greater certainty to investors. The de-authorisation provisions introduced by the Health Act 2009 are removed (as a consequence of NHS Trusts being abolished), although the general mechanism, under which a special trust administrator can be appointed to report on what action should be taken by Monitor, has been maintained. Monitor will have the power (with approval of the Secretary of State) to dissolve an FT or transfer its property, rights and liabilities to another body.

Crucially, the Bill fills a current gap by providing that liabilities which cannot be transferred to another body can be transferred to the Secretary of State. This mirrors the security that de-authorisation to an NHS Trust currently gives to investors. This does, of course, mean that the public purse takes all the risk, which will not tally with the objective of remediating the public debt, and so the Bill indicates that this is only a temporary solution to the problem of failing hospitals.

In the longer term, the Bill caters for the prospect of the Secretary of State introducing regulations to apply certain of the Insolvency Act regimes to failing FTs which provide vital ('designated') services to ensure that the continuation of service is uninterrupted, while ensuring that creditors (and members if dealing with a company) are better protected. The objectives of this type of court appointed administrator would be to rescue the provider as a going concern or transfer property, rights, liabilities and functions to another licensed provider or subsidiary of the company in administration.

The Bill also provides for further regulations to detail financial assistance that may be given to failing providers. Such assistance can be raised via an annual levy on licensed providers or charges on commissioners. This is very similar to (if not identical with) the special administration regimes of other regulated sectors where essential services or infrastructure cannot be allowed to fail. These changes will no doubt take some time to prepare given the complexity of the matters involved, so the amendment of the current provisions (discussed above) will operate in the interim.

Conclusion

As many other commentators have highlighted, the Health and Social Care Bill is as convoluted as it is large. This may have been the result of a pressing timescale to prepare the draft, but it nonetheless creates a disappointing lack of transparency. The Coalition Government appears to have lost an opportunity to reconsolidate health and social care legislation, and has instead added to the complex web of health legislation. This will result in a greater legal burden (and cost) for the sector.

Producing clear legislation and a regulatory framework which are easily accessible and can be understood by everyone involved in the healthcare industry is surely a reasonable goal for any Government. The Bill in fact reverses some of the benefits which arose from the consolidation of most NHS legislation less than five years ago, in the National Health Act 2006.

The White Paper indicated an intention to remove 'arbitrary political meddling' with the NHS and that this raft of reform would reduce the need for further structural changes in the long term. If successful this would give the NHS the highly desired opportunity to settle down and progress with longer term improvements without the distraction of structural upheavals. Yet, given the untested nature of some of the most fundamental changes to the NHS and possible changes in the political landscape prior to the full implementation of the current plans, it appears naive to believe that further reforms will be unnecessary.

Regulations must be proportionate and cost effective. Certainly the implementation of the changes will involve large amounts of management time, cost to the public purse and personal anxiety. So, will these changes truly be a revolution for the better?

As JM Keynes insightfully said in a different context: 'It is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the transition'.

Will the long term benefits of the Bill be sufficient to overcome the 'evils of the transition'? Since most of its provisions apply only to England, allowing us a comparison with the unamended regimes in Scotland, Wales and Northern Ireland, we will in due course be able to find out.