Published: 07/11/2002, Volume II2, No. 5830 Page 5

Foundation hospitals will enter into contracts with primary care trusts for up to seven years in deals designed to give them financial stability, HSJ has learned.

At a two-day seminar in London last week, health secretary Alan Milburn and senior Department of Health officials met about 30 chief executives from three-star trusts to outline further details on the shape of foundation hospitals.

DoH officials told the meeting that within five to ten years, foundation hospitals will become the norm.

Chief executives at the meeting told HSJ they heard that foundations will enter into legally binding contracts with PCTs running for between five and seven years.With their extended time frame, such contracts would give foundation trusts the financial stability they need to attract private-sector investment.

One chief executive said: 'I think [legally binding] contracts were something many of us didn't appreciate when the policy came out. They will offer some stability because it will ensure income flows when the money that foundation hospitals are borrowing is being paid back. That is going to be important when attracting investors.' Another said he was 'reassured' by the level of longterm commitment the DoH was indicating to the new policy.

One said: 'Many of us felt beforehand that the devil would be in the detail, in terms of foundation hospitals. But I think many of us left reassured and impressed by the level of commitment the DoH has. They said they felt foundations in five to 10 years would be the norm rather than the exception in the NHS.'

Though no exact figure has been produced, it is believed around half-a-dozen trusts are likely to win foundation status next year.A DoH prospectus is due out at the end of the month, with a deadline for applications in January 2003.

HSJ understands that neither the financial freedoms which will be granted to foundation trusts - particularly the controversial issue of selling-off trust land - nor the independent regulatory body designed to govern borrowing, were discussed in much detail.And a number of senior managers expressed concern that such issues will have to be 'fleshed out' before they apply for foundation status.

One crucial area, according to another chief executive, are the level of tariff prices - the new system outlined in last month's Reforming NHS Financial Flows policy document - to ensure trusts are paid according to the amount of activity they carry out.

One chief executive said trusts would be unlikely to know what rates the tariffs would be set at ahead of the deadline for foundation applications in January.

And he expressed concerns that the tariffs are set high enough for trusts to benefit from foundation status: 'If the tariffs are set too low, if they are not significantly higher than average healthcare resource groups, then trusts are not going to make sufficient money from the scheme for investment in service development. And the money coming in will also affect how attractive trusts are to lenders.'One chief executive said the proposed stakeholder councils will be crucial in selling the foundations concept to the public.

'Obviously the whole aim of this policy is to free trusts from Whitehall control, but as public servants we recognise that we have to be accountable to someone, and under this system it will be local stakeholders - the local community. I do not think senior managers are enthusiastic about the idea because they can manipulate these councils into nothing more than talking shops. It is exciting because there is scope for these to be developed in a way that meets local needs.'

He added: 'There was concern [from the DoH] on how this policy is going to be sold to the public. There will be a belief it is a form of privatisation - which it is not. The councils will be crucial.'

Chief executives heard that freedoms over pay and conditions would be 'absolute' for foundation trusts. But there was debate about whether this meant they would operate outside the Agenda for Change framework.