Unison has launched judicial review proceedings against foundation trust regulator Monitor in a bid to stop trusts using arm's-length organisations to expand private patient work.

The union is challenging the legality of Monitor's financial guidance to foundation trusts, which lets them avoid a cap on private patient income by setting up a separate company to provide treatment. Unison says this is a misinterpretation of the Health and Social Care Act 2003.

Monitor reviewed its interpretation at its board meeting on 30 January after Unison threatened legal action if Monitor did not amend its guidance. As HSJ went to press Monitor confirmed its board had reached a decision - but it was not ready to reveal it.

Foundation trusts were taking this reticence as a sign that Monitor has decided to stick with its interpretation and risk a judicial review. One senior source said: "It would be seen as negligent of Monitor if they had decided to change their interpretation yet hadn't told trusts this, as that would imply trusts were breaking the law."

Unison issued its judicial review claim in the High Court earlier this week. A source told HSJ that in the absence of a statement from Monitor the union had taken action as judicial reviews must be launched within a specific time frame.

Unison head of health Karen Jennings said: "Seeking a judicial review is not a step we take lightly. We believe that Monitor's rules contain a major loophole. The cap on private patient income was brought in to alleviate fears that cash-paying private patients would get precedence over NHS patients."

For some trusts the ability to extend their private income beyond the cap is seen as vital.

Internal emails between Monitor's executive chair Bill Moyes and senior staff released under the Freedom of Information Act show that Monitor has been long aware of the issues.

In a July 2004 email about a meeting at Great Ormond Street Hospital Mr Moyes wrote: "They will ask about private patient income, our definitions and the operation of the cap. So be ready. If that income were at risk, their enthusiasm to be a foundation trust would drop rapidly. They may want some advice on how to protect this without breaching the cap."

The cap limits the percentage of total income trusts can get from treating private patients to the level it was in 2002-03. While the 2003 act defines private patient income as charges relating to the treatment of non-NHS patients, Monitor's financial reporting manual defines private income as that arising from activity provided "directly" to patients. In accountancy terms this means that income received via special purpose vehicles does not count against the cap.

Foundation Trust Network director Sue Slipman said it had been lobbying ministers to loosen the cap as a number of trusts felt it restricted their ability to use private patient income to subsidise NHS work.

  • The Department of Health has reappointed Monitor executive chairman Bill Moyes - but only for two more years. The announcement came this week exactly a month after his last contract, for four years, expired. HSJ understands Mr Moyes had been in contract negotiations since December. A DH spokeswoman denied there was anything "untoward" in the shorter contract. "It doesn't rule out it being extended in the future," she said. However, the short time span will fuel speculation over the future of Monitor as the foundation trust regulator, particularly as the bill establishing the new Care Quality Commission super regulator is being debated in Parliament.