Foundation trusts must ensure the proportion of the income they earn from the treatment of private patients is no more than it was in 2002-03, even if it was earned through a subsidiary or joint venture.

The regulator Monitor has issued revised guidance saying income originating from the treatment of private patients should be included under the cap, regardless of whether it was earned directly or indirectly, or through a subsidiary or venture in which the foundation held only a minority stake.

Income originating from the treatment of private patients should be included under the cap, regardless of whether it was earned directly or indirectly, or through a subsidiary or venture

The revision follows a High Court ruling in December that Monitor’s previous guidance was unlawful in allowing foundations to exclude income earned through subsidiaries and arm’s length bodies when they calculated the cap.

The guidance will apply from April 2010 and will require foundations to recalculate their base year as well as their private patient income for 2010-11 onwards.

Monitor says that it expects the rule change will cause “a small number” of foundation trusts to be in breach of their cap and therefore their terms of authorisation.

It will ask them to set out their plans to address the breach and will treat each on a “case- by-case basis”, the guidance says.

Contrary to the regulator’s initial concerns, the new tightened rules will not lead to foundations needing to include as “private income” the income earned through the NHS personal injury scheme, reciprocal agreements with other European countries or treating overseas visitors in emergencies.

Contracts with local councils, prisons and other public bodies would also be excluded, as will income earned through providing ambulance cover at public events.

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