Published: 01/12/2005 Volume 115 No. 5984 Page 15 16

Monitor and the Healthcare Commission are slugging it out as policy-makers try to decide who should oversee the new healthcare market. Ian Lloyd reports

As the revolution in the NHS market ploughs on, organisations charged with controlling the system are themselves on the brink of a massive overhaul.

Regulation heavyweights Monitor and the Healthcare Commission stand to be the biggest winners or losers in the Department of Health's review of how the health market is controlled in a new era of competition and contestability.

The review of regulation was announced by chancellor Gordon Brown in his Budget earlier this year and will decide the regulatory framework from 2008. Headed by former North Central London strategic health authority chief executive Chris Outram and overseen by a review panel led by Ofcom chair David Currie, it is expected to report to ministers by Christmas.

Foundation trust regulator Monitor has come out fighting its corner, with a bid to become the NHS's single economic regulator.

Chair Bill Moyes has outlined a clear vision in which Monitor would set the market tariff and establish rules on market entry and exit, working alongside a separate quality inspector.

The Healthcare Commission, the main quality inspector at the moment, has played its cards closer to its chest. But chair Professor Sir Ian Kennedy has described an 'emerging view' that one body should regulate both economics and quality. Moreover, he has suggested that by the time all trusts reach foundation status, Monitor's role could 'arguably' become defunct.

Both organisations, however, declined to supply HSJ with their submissions to the DoH review.

Tension is in the air.

'There is more consensus on what the functions of economic regulation are than who should do it, ' says King's Fund director of policy Jennifer Dixon.

'One question will be about what economic regulation is and who should do it. Another will be about those functions that are not carried out by government but carried out by independent regulators. Then there are questions about the role of the Healthcare Commission becoming the major quality regulator and should it be doing economic regulation.' Ms Dixon says there is a 'strong legitimate role' for the DoH in economic regulation because taxpayers fund NHS care, the state owns its institutions and is ultimately accountable for their performance and because of the 'challenging financial environment'.

'It is not likely or appropriate that some of the functions of economic regulation are relinquished by the state, for example setting the tariff or stimulation of market entry which may need significant financial investment, ' says Ms Dixon, author of the paper Regulating Healthcare: the way forward, published by the King's Fund this week.

A submission to the review by the NHS Confederation supports the King's Fund view that the DoH should set the tariff while payment by results is phased in.

But the Foundation Trust Network's contribution argues that while the government should remain 'arbiter over the ultimate size of the pot', purchasers and providers need to be confident that the tariff fairly reflects actual costs and is not used to manipulate service provision.

It has put forward the Bank of England model - whereby the tariff is set by an independent panel in the same way that interest rates are set by the monetary policy committee of the Bank of England.

Network director Sue Slipman explains: 'We have put forward this model because clearly all stakeholders need to have confidence in the transparency and stability of the tariff framework.

'That goes for everybody, foundation trusts and also independent providers who come into the market and are going to want some stability over a period of time so they can judge their investment decision.' Ms Slipman says the system needs to be independent, otherwise private providers will be fearful of entering a market where 'a political whim could change everything'.

Monitor chair Bill Moyes agrees, arguing that service providers should operate in a non-political space.

'My worry about leaving the tariff in government is that it is always going to be tempting for government to change the tariff mid-year for a variety of good and bad reasons. We do not think that is something the system can stand when it gets much bigger.' Sources close to the review suggest that if the DoH takes responsibility for setting the tariff then there may be no future for Monitor. Commissioners will be responsible for market entry and exit simply by deciding which providers are up to the job.

At the Labour Party conference in September, Healthcare Commission chair Professor Sir Ian Kennedy described Monitor as 'arguably a body that was set up to handle a transitional period up to 2008'.

But Mr Moyes aims to convince the DoH that Monitor should take on this role as well as dealing with issues like clinical and non-clinical failures and ensuring providers are not destabilising the market by selling services below cost price.

He argues that by 2008-09, when all trusts have foundation status and there will be increased involvement from the private sector, 'the department should not attempt to performance manage them because the NHS will no longer be a corporate entity that can be managed like a single company'.

Mr Moyes adds: 'Alongside us we see a very strong quality inspector, presumably the Healthcare Commission, providing information to patients so they have good information to make choices and know whether or not purchasers are delivering good healthcare for the money they spend.' The NHS Confederation states in its submission that an effective regulatory framework is essential as the NHS becomes more marketdriven with a range of providers.

Confederation policy director Nigel Edwards says its members see regulation as unco-ordinated with gaps and overlaps and 'a degree of competition between the regulators'.

Mr Edwards says the functions of regulation - licensing and accreditation, holding organisations to account, promoting improvement and managing the market - have become confused in the current system.

'If I was a regulator, one of the things I would be wrestling with is which of these things is really part of the regulator's remit and where do they best sit, ' he argues.

'One of the lessons of history is that organisations whose functions are not clear sooner or later have people asking: 'Why did we set this up? What was that for? What's it supposed to be doing?' The next question being obvious: 'Can we live without it?'.' Along with the Foundation Trust Network, the confederation is arguing against establishing a single 'super-regulator' for fear it will focus on finance at the expense of quality.

They also agree that the Healthcare Commission should continue to regulate and accredit those trading under the NHS brand to ensure they meet the necessary standards for patients.

Two organisations keeping a keen eye on the review are the Commission for Social Care Inspection and the Mental Health Act Commission, which regulates NHS organisations' performance under the Mental Health Act. It is unclear whether the review will have any impact on government plans to merge both with the Healthcare Commission by 2008.

'We are not really concerned about structures as the very important function of protecting the rights of people detained under the Mental Health Act, ' comments MHAC director of strategy Gemma Pearce.

'Our worst fear is that with all of this [the arm's-length body review and introduction of the new Mental Health Bill] going on it could be to the detriment of detained patients, but I do not think that is likely to happen.' The timing of the review has come in for some criticism. How can organisations reach conclusions on how NHS regulation should work when the market it will be monitoring is still being shaped?

CSCI director of strategy David Walden says the regulatory framework needs to be kept stable while the impact of payment by results, practice-based commissioning and foundation trusts becomes apparent.

'There is the potential for regulators to take their eye off the ball because they are focusing on their own restructure. One-and-ahalf million people receive social care a year and many more millions receive healthcare. Our primary responsibility is to make sure that the quality of the services they receive are fit for purpose.' The Foundation Trust Network points to the same problem, stating that its submission can only be 'tentative' until 'we are clearer about the shape and size of the market for which regulation has to be fit for purpose'.

Network director Ms Slipman says there is a danger that NHS regulation will not be fit for purpose unless 'book ends' are put around which parts of the market are contestable and which services are protected, like accident and emergency.

Market management of protected services, in the opinion of the network, should fall to the new SHAs as long as their focus shifts from their current role as performance managers.

'Protected services will have to be supplied by someone. If the organisation supplying those services cannot manage it and is unproductive I do not think the government will protect it. It will protect the service and someone will have to be brought in to run it. It is about at what sort of level you make a decision like that, ' explains Ms Slipman.

The Audit Commission, which is also being examined by the review because of its role in auditing the quality of NHS financial systems, believes commissioners of health services have a major role and power in managing their market.

Managing director for health Andy McKeon points out that similar systems work in local government and social care.

'It is about commissioners learning how to manage their local 'market', ' he suggests. 'Some of the services will not be contestable, some of them will be. In some cases they might need to think about how they need to bring in additional providers and how they are ensuring patients and users are getting the right information and are able to make choices. That would help manage market entry and indeed exit.' He adds: 'The commissioners need to be challenged on what sort of a job they are doing. There will be performance management by SHAs but there should also be external performance assessment.' Greater Manchester SHA chief executive Neil Goodwin admits there are risks around reforming regulation and the NHS market at the same time.

But he adds: 'One of the things we are good at in the NHS is dealing with lots of difficult issues at the same time.' Revamping the way the NHS is regulated is seen as key to convincing people that the government is serious about giving more independence to organisations to deliver services away from DoH control.

Mr Goodwin says that as the NHS moves away from a 'detailed hierarchical performance management system' through government targets to a regulatory system, the implication is that people have more freedom to be innovative and do things differently as long as they comply with core standards and quality and cost.' But he warns: 'If we take the strong performance management we currently have and replace it with exactly the same system and call it 'regulation' instead, the question in my mind is what have we changed?' The NHS Confederation's Nigel Edwards adds: '[Following the review] our members will be hoping for an independent price-setter; a reduction in the burden of regulation; and more co-ordination and integration of inspection.

Regulation is about licensing and accreditation. It is not about a new way of performance managing providers.

'There is a bit of a concern that regulation may become surrogate performance management and every time the government has a problem with something such as MRSA, ministers stand up and say: 'We are going to give it to the regulator' and instead of being performance managed the regulator does it instead.

'You will not get good innovation if you regulate to the point that noone can innovate.' .