A new mandatory contract for acute services is causing concern among commissioners and providers because some feel it places unreasonable demands on trusts. Jeremy Roper explains

The NHS operating framework for 2008-09 included the latest version of the standard NHS contract for acute services, which commissioners and providers were all expected to sign, unless they had an existing contract in place.

Some see the contract as merely a common sense statement of what acute providers should be providing and what the public should expect from their local hospital.

Others, however, have taken exception to what they perceive to be unreasonable demands and penalties being centrally imposed on trusts in a way that is inconsistent with the independence foundation trusts are supposed to enjoy.

Certainly, the standard contract is worded in a way that is very favourable to commissioning primary care trusts. The Department of Health is clear that the majority of the contract is mandatory and therefore not intended to be negotiable.

The contract contains sanctions if certain targets (such as the 18-week referral to treatment target and the C difficile target) are not met. Foundation trusts that are confident of meeting these targets often have little difficulty in signing up. Others, no doubt including some that are concerned they may be at risk of missing certain targets, have raised objections.

Typically, these objections are that even if the targets are reasonable, they are unenforceable since the sanctions do not relate to any loss commissioners may actually suffer. Some trust boards take the view that they might be in breach of their duty to act in the best interest of the trust by agreeing to what they see as an onerous, one-sided contract that could cause them loss.

Foundation trusts, of course, have an obligation under their terms of authorisation to co-operate with PCTs.

Regulatory action

In a letter from Monitor to foundation trusts in January this year, chair Bill Moyes wrote that an unreasonable failure by a foundation trust to conclude a contract and then deliver contractual obligations may be regarded as a breach of their terms of authorisation and could lead to regulatory action if significant problems remain unresolved.

The DH's letter to foundation trusts in February was more robustly worded, suggesting that failure against requirement could constitute a significant breach of terms of authorisation that could result in intervention by Monitor.

In the revised compliance framework just issued, Monitor seems to be avoiding intervention (unless possibly as a last resort) as a sanction, relying on taking non-cooperation into account when assessing governance risk and in seeking proposals for remedial action.

In reality, commissioners and providers will need each other, and foundation trusts have to demonstrate to Monitor (and possibly funders as well in the future) that they have secured a guaranteed source of income every year.

Procurement law

It will also be interesting to see how procurement law plays a part. The operating framework contained principles of co-operation and competition that reflect the legal requirement to test the market. This may be academic in any locality where there is no suitable alternative service provider to the local foundation trust for acute services.

However, this may change over time, with increasing roles for the private and third sector. There are already signs of increased market testing in relation to mental health services, for example.

The current drive to complete the conversion of as many acute trusts as are suitable to foundation trust status will presumably end in mergers or acquisitions for those unable to secure support for foundation trust status.

In time, the stronger foundation trusts, particularly in urban areas served by several acute providers, may merge with or acquire those foundation trusts struggling to cope with the pressures of meeting centrally imposed targets while trying to survive in an increasingly competitive market.

Meanwhile, it is difficult to see the Department of Health doing anything other than continuing to put pressure on foundation trusts (and indeed all other providers of healthcare to NHS patients) to raise standards and demonstrate value for money.