From next year, foundation trusts will face an unforgiving regime which introduces transparency to their funding - and could lead to them being dissolved and their services distributed to other providers.

Trusts running into financial trouble will be able to appeal for additional funding through enhancements to the tariff. But the bill for this will sit with their commissioners - who will receive no additional money to fund this. And some trusts may need more time - to reconfigure services or to reduce costs - than commissioners or Monitor will want to give them.

If a trust is judged to be a failure it may be put in the hands of an administrator, appointed by Monitor. Commissioners will designate some services as essential - which means they must continue to be provided - but others could be closed. The trust could be acquired by one or more foundation trusts, or it could be dissolved.

It’s a regime which is based around transparency - no hidden subsidies to keep trusts in the black, such as exist at the moment - and the threat of a harsh ending.

The essence of the government’s proposals is that:

  • There should be a pre-failure or distress regime which seeks to allow the turnaround of a poorly performing provider before it reaches a point of failure, whilst at the same time identifying the services which need to be protected in the event of failure
  • Commissioners, acting in the interests of patients, have primary responsibility for ensuring continuity of high quality, safe and effective services for patients, and should lead the development of any proposals for the reconfiguration of services in order to secure clinical safety and quality, and long-term financial sustainability.
  • There should be a transparent subsidy regime for services that commissioners want to protect but which even an efficient provider could not provide at the national tariff
  • The Secretary of State retains the right to veto a proposed reconfiguration against specified criteria.

Monitor will be consulting fully on the details of their role in the coming months. Here they answer some questions on the regime.

Q: What will be Monitor’s involvement in any form of “pre failure” intervention to help trusts which are having problems?

A: It is for the government to decide what the exact regime looks like. Whether the sector regulator plays a role in the pre-failure regime depends on the outcome of the Health and Social Care Bill and our subsequent consultation. What is important is that there is a pre-failure or distress regime which enables commissioners to work with providers to identify services that must be protected in the event of provider failure, and how this might best be achieved.

Q: Everyone tends to talk of failure in terms of finance but could the failure regime be used in the event of other types of failure, for example clinical?

A: Primary responsibility for addressing clinical quality and safety will remain with commissioners and the CQC. However, clinical failure is very often associated with, or leads to financial failure, and so it is possible that the proposed failure regime could play a role in resolving issues of clinical failure. Either way, Monitor will continue to work closely with the CQC and other organisations to ensure that such issues are addressed at as early a stage as possible.

Q: What would be the trigger/s for moving into administration?

A: We are currently in the process of developing our policy in this area, and will be consulting on it in due course. However, in response to concerns raised during our informal pre-consultation on proposed Monitor licence conditions, we can confirm that it is unlikely to be triggered by a single measure alone, such as a change in a provider’s credit rating.

Q: What happens if no one wants to take over a “failed” trust or if some of its services/sites are not wanted by potential operators?

A: Although this has not happened to date, options being developed under the Bill’s new provisions are:

Where the failing service is designated an essential service, ie where services cannot be moved elsewhere or where there is not an alternative provider able to take on the service, Monitor’s risk pool will play a role in ensuring that funding is available to ensure the continuity of these services. Commissioners, working with special administrators in the case of a “failed” provider, will take the lead in deciding how these services can best be delivered, which might involve some element of reconfiguration if required.

In general, it is not for Monitor to say who will be designated a provider of an essential service: this will be a decision for local commissioners, who will request services which they deem to be essential should that service provider fail.