Regulator Monitor is to tighten the rules on the private patient income cap after the Department of Health and auditors criticised a 'loophole' in the regime.

Following a consultation, Monitor has admitted its current interpretation of the law is "too permissive". From April, income from joint ventures and companies over which foundations have influence will be subject to the cap.

But the change - designed to halt a judicial review by Unison - may be just a temporary measure. Monitor would like the government to change the law.

HSJ understands ministers have indicated they are willing to consider a change to the legislation.

The cap limits the proportion of private patient income foundations can earn to the proportion it was in 2002-03. Until now, Monitor had allowed foundations not to include income channelled through third parties, arm's-length organisations or "associates" and joint ventures.

Calls for change

Unison wants all income derived from private patients to be included in the cap - something Monitor has said is "unworkable".

Research by Monitor suggests the change could lead to another£3m of income being disclosed. Last year trusts reported£165m of income from private patients.

The move to will affect at least two organisations - Guy's and St Thomas's and Moorfields Eye Hospital foundation trusts. Others are planning ventures on the basis of the current rules - including Great Ormond Street Hospital, which has a plan to part-fund new facilities by extending private patient income. A trust spokesman said it was still considering the implications of the rule change.

Unlawful

The change was suggested by the Audit Commission and accountancy firms Deloitte and Grant Thornton. But the DH's legal opinion - shared with Monitor - suggested the current rules and compromise were both unlawful and only Unison's position would prevail in court.

Unison head of health Karen Jennings said the union was committed to pursuing judicial review.

In a letter to DH permanent secretary Hugh Taylor dated 3 November, Monitor executive chair Bill Moyes said: "My board appreciates the arguments that, in some respects, the rules we have operated to date are too permissive."

The letter makes clear Monitor wants legislation to change the "increasingly distant" 2002-03 baseline and take account of the impact of new rules on top-up payments and overseas patient demand.

It is not yet clear if any trusts will breach the terms of their authorisation under the new cap but Monitor has said it will work with any affected to minimise disruption while they comply.