Private providers attack Monitor failure regime

Under the government’s NHS reforms, insolvent providers of essential NHS services would be subject to a special form of administration, intended to ensure uninterrupted access to patient care.

Monitor’s consultation proposes that commissioners would request that certain services were given additional protection from closure. Providers would not be able to dispose of assets used to provide them without the regulator’s permission.

They would also be required to pay into a “risk pool” fund, which would allow Monitor to maintain essential services in the event of a financial collapse like that of care home provider Southern Cross in 2011.

In response to a recent Monitor consultation, the Independent Mental Health Services Alliance wrote: “The proposal to have a special form of administration for healthcare, which puts patients ahead of creditors, whilst laudable, will make it impossible for independent sector providers to borrow – the banks will not agree to becoming unsecured or to becoming a lower class of creditor.”

The alliance, which includes major providers of NHS mental health services like Partnerships in Care and Care UK, added: “The government therefore needs to put alternative funding in place or require banks to lend to providers of the NHS.”

The IMHSA said “existing systems coped well” in the Southern Cross failure. This, it said, demonstrated that “bankruptcy does not have to mean risks to patient welfare”. It argued that excess capacity in mental health meant that, if a provider became insolvent, patients could be transferred to another provider “even if [that were] out of area”.

St Andrew’s Healthcare, the largest charitable provider of NHS mental health services, said the risk pool would involve using charitable funds to effectively insure heavily indebted commercial providers. Chief executive Philip Sugarman told HSJ: “We are concerned it may be illegal under charity law to commit our finances to help bail out these highly risky ventures.”

Independent mental health providers earned £974m from the NHS in 2010, and controlled 30 per cent of UK hospital bed capacity, according to analysts Laing and Buisson.

A Monitor spokesman said it was “important that our proposals do not restrict the ability of providers to raise capital for investment”. He added: “It may not be possible for lenders to take security on assets, so we will have to look at alternative options, but we are still developing policy on how this is best achieved.”