'Market advocates praise choice, but those within them do their best to create a monopoly'

There are currently 73 foundation trusts in England. Their forecast share of NHS income for 2007-08 is over£15bn, and nearly all are in robust financial health. Last year 56 out of 59 foundation trusts ended the year in surplus. Only Doncaster and Bassetlaw Hospitals, the Royal National Hospital for Rheumatic Diseases and University College London Hospitals were in deficit.

It's already well over three years since the first foundation trusts were set up. The business model is well established, and it is reasonable to assume foundation status is the ambition of all remaining trusts.

Not least because the alternative - described by one foundation trust chief executive as 'being boiled down for glue' looks unattractive. But how many foundation trusts could there feasibly be in the fullness of time? Can each current NHS trust realistically hope to pass Monitor's assessment process?

Monitor chief operating officer Stephen Hay recently forecast there would be about 100 foundation trusts across England by April 2008, and 130 by the end of the following year. This rate of progress would, in principle, still leave nearly 100 non-foundation trusts in 2009-10.

Or would it? Following sound commercial role models and the logic of inter-provider competition, foundation trusts are increasingly interested in growth by merger and acquisition. Monitor expects its capacity to process applications from would-be new foundation trusts (50 per year) to be squeezed as it attempts to accommodate merger proposals. 'The acquisition of Good Hope Hospital trust by the Heart of England foundation trust in April 2007 may be the first of many such transactions', states Monitor's 2007-08 business plan.

Yes indeed. This purchase of one Birmingham NHS organisation by another has set the precedent for further acquisitions.

Good Hope's financial failure prompted the acquisition, so the treatment of a£20m historic debt was inevitably a key issue. It was converted into non-repayable public dividend capital, an elegant solution satisfying parallel desires: Heart of England board's insistence on keeping the debt off its balance sheet, and a wider desire to avoid actually handing over cash to clear the debt.

The accounting arrangements were also innovative. Heart of England deputy chief executive and chief finance officer Beccy Fenton describes them as 'merger by absorption, which is not strictly merger accounting or acquisition accounting', and says more clarity will be needed for future deals. The agreement in Birmingham leaves the strategic health authority paying interest on additional public dividend capital covering the Good Hope debts, a compromise that may not be feasible elsewhere.

Even the formal vehicle for the acquisition proved tricky. If Heart of England was buying the assets, who was selling them? In the end the acquisition was undertaken using NHS dissolution and transfer orders, an imperfect vehicle as the purchaser cannot negotiate indemnities and warranties.

But if the Birmingham merger was initially prompted by Good Hope's financial failure, it was also driven by Heart of England's growth ambitions. Whether by chance or design, the acquisition went some way to reducing exposure to competition and choice.

That's what happens in markets. Those who advocate market models praise the benefits of competition and choice, but those working within them do their level best to negate competition and create the nearest thing to a monopoly they can get away with.

Future mergers may be driven more by foundation trusts' desire for expansion and local dominance than by opportunistic efforts to address intractable financial problems. Especially in the absence of a clear foundation trust failure regime, or a coherent and predictable model for handling historic debt or long-term PFI commitments.

In commerce, companies seek synergy, a good fit, or undervalued assets. Why take on the financial basket cases of the NHS when there are easier targets?

The second NHS acquisition of 2007 saw South Staffordshire Healthcare foundation trust take over mental health and learning disability services from Shropshire County primary care trust. Which leads to an interesting thought. Suppose you are chair or chief executive of an expansion-minded foundation trust; predatory even. Where are the juiciest opportunities likely to be over the next couple of years?

Chesterfield Royal Hospital foundation trust chief executive Eric Morton argues that foundation trusts should be bidding for primary and community services. He likens the acute foundation trust to 'an all-terrain vehicle, able to go anywhere to provide services'.

And where better to build an empire than in the field of primary care provision, which promotes itself as the modern alternative to the hospital. Or among the Cinderella (but often asset-rich) provider arms of PCTs, today's equivalent of the directly managed unit? Expand, and nobble the competition at the same time a happy combination.

But what of those provider arms' own planned transition path to community foundation status? What of those pilots that are to be the subject of a 'national announcement in the summer'? Well, another part of the Birmingham story is the sheer volume of management effort that went into turning around Good Hope's financial performance, so that it would no longer leak revenue. By all accounts it was heavy going.

From an acute viewpoint, far better let these potential future 'partners' sort out financial problems for themselves, believing future security lies in community foundation status. (Without the certainty of tariff income, it sadly doesn't.)

They're not going anywhere. Far better let someone else's sweat and tears pave the way to a brave new future under the Monitor umbrella, and then let nature take its course.