On 13 September 2017 NHS Improvement issued a 'Consultation on our oversight of NHS-controlled providers', in which the regulator proposes to extend its oversight of providers that are controlled by one or more NHS trusts or foundation trusts ("Trusts"). Broadly, for in-scope providers NHS Improvement proposes to apply regulatory oversight that is similar to that for trusts.
Why is NHS Improvement proposing to introduce these new requirements?
NHS foundation trusts have the power in law to incorporate subsidiaries for the purposes of, or in connection with, their functions. NHS trusts have more limited powers to incorporate companies for income generation purposes and otherwise, under the direction or order of the Secretary of State. NHS trusts and foundation trusts may therefore deliver some of their services through such subsidiaries, either wholly or partly-owned – for example, to deliver pathology and pharmacy services. In conjunction with the development of new models of care, NHS Improvement recognises that these may utilise joint ventures or wholly-owned subsidiaries.
It is NHS Improvement's proposal that because these entities deliver NHS services they should, if they meet the criteria for an NHS Provider Licence ("Licence"), be subject to oversight which is similar to their trust parent organisations. The new oversight will not apply to providers that are not NHS-controlled, as defined in the consultation document, or which are exempt from the requirement to hold a Licence.
What is proposed by NHS Improvement?
Providers that are registered with the Care Quality Commission are already required to hold a Licence unless they are exempt under the published criteria. For providers currently defined as "independent" the Licence is limited to conditions dealing with matters including pricing, competition and patient choice. NHS Improvement's oversight of these providers is light-touch, essentially comprising an annual self-certification against the Licence conditions.
The consultation proposes that NHS Improvement should increase its oversight of providers that are required to hold a Licence and are defined as "NHS-controlled"; the criteria for holding a Licence are defined here. Trusts with NHS-controlled providers should read the Licence criteria to determine whether they apply in each case but, in summary, an NHS-controlled provider will be subject to the new requirements if it provides any of the following:
- Commissioner requested services (of any value);
- NHS services other than primary medical or dental services, and has an applicable NHS turnover of £10million or more;
- NHS-funded nursing care or continuing care which are commissioner requested services;
- Primary medical or dental services of any value which are commissioner requested services; or
- Services of any value that are not registered with the Care Quality Commission but are commissioner requested services.
In section 5 of the consultation document, NHS Improvement proposes to use an accounting definition of "NHS-controlled"; it is important to note that in addition to providers that are wholly-owned, entities controlled by more than one NHS organisation(s) (and those that are partly-controlled by non-NHS organisations) may be in-scope.
NHS Improvement proposes to add to the Licence for NHS-controlled providers a condition which is very similar to condition FT4 that is within the Licence issued to NHS foundation trusts. The text of the proposed condition is on page 44 of the consultation document.
NHS Improvement proposes to apply its Single Oversight Framework (SOF) to NHS-controlled providers, utilising the new Licence condition to regulate these providers more actively and extensively than is currently the case. Alongside the SOF, NHS Improvement proposes to apply the majority of its regulatory requirements, listed on page 14 of the consultation document. For example, NHS Improvement will apply its enforcement guidance, special measure regime, well-led framework, serious incident framework, and requirements in respect of pay for agency staff and expenditure on consultants.
What are the implications of the new requirements and what action should trusts take?
NHS Improvement will segment providers in a similar way to NHS trusts and foundation trusts to determine the support that it will provide for them. It is to be expected that NHS Improvement will take enforcement action against NHS-controlled providers where necessary. It would be possible, therefore, for NHS Improvement to place an NHS-controlled provider into special measures. In these or other circumstances, NHS Improvement may also take action against the trust parent(s) of the provider concerned.
Trusts with in-scope subsidiaries, either wholly or partly-owned, should therefore ensure that before the requirements come into effect, proposed for April 2018, their NHS-controlled providers comply with the expectations set out in the new licence condition and all the requirements listed on page 14 of the consultation document. Trusts and their subsidiaries should be ready to provide evidence of compliance to NHS Improvement.
In respect of governance, NHS-controlled providers will be expected to have in place board and committee structures, as well as associated accountability arrangements, to ensure that all aspects of the provider's services may be monitored by the board, and to enable risk to be managed. The Well-led Framework will also apply. NHS Improvement is also likely to expect to see arrangements which allow trust parents to monitor the performance and compliance of subsidiary providers to the extent appropriate. There are also requirements in respect of expenditure on agency staff and consultants.
Trusts should note, too, that all "toolkits and good practice guidance" that apply to trusts will (subject to the outcome of the consultation) also apply to NHS-controlled providers; the scope of this remains to be clarified but the consultation document states that NHS Improvement will advise trusts in response to specific requests.
Trusts may wish to respond to the consultation, which closes on 12 October 2017.
Points for clarification
Although many aspects of NHS Improvement's proposals are clear there are some areas where further clarity is required:
Definition of control: NHS Improvement proposes to adopt one of the three potential definitions of control set out in the consultation document. In our view the proposal, which is an accounting definition, may be less clear and meaningful to trusts than the other two. If the proposed definition is adopted, we believe that it will need to be accompanied by more detailed explanation. This is likely to be the case particularly where a provider is controlled partly by a non-NHS organisation, ie. a joint venture.
In-scope requirements: As highlighted above, the consultation document states on page 14 that "All toolkits and good practice guidance" will apply to NHS-controlled providers. Trusts may require clarity on this from NHS Improvement. For example, it is not currently clear whether NHS Improvement will apply to NHS-controlled providers its process for giving opinions on trusts' proposals for remuneration of very senior managers.
Licence applications: The consultation document states on page 17 that (assuming the proposals are implemented) each NHS-controlled provider will be asked to revoke its current Licence and apply for the new one. NHS Improvement has not made clear whether it will issue a new Licence in place of each one revoked or whether providers will need to complete the application process.