A Department of Health document on the proposed strengthening of the NHS provider market, seen by HSJ, sheds further light on the reforms’ far reaching and sensitive consequences.

Uncomfortable issues raised by slides presented to the last meeting of the NHS management board include the prospect of services being closed under the proposed special administration regime, and hospitals compromising service quality to compete on cost.

The document, which builds on the NHS white paper and DH economic regulation consultation, says: “Significant policy issues remain unresolved.”

These include the issue: “How should [the national commissioning board] and Monitor manage risk of price competition driving down quality?”

Competitive NHS pricing - allowing trusts to undercut each other to attract commissioners - has proved controversial when proposed in the past.

The document is understood to have been presented by DH managing director of provider development Ian Dalton. It says under the proposed special administration regime for trusts, which will be applied if they financially “fail”, the “aim is to secure continuity” of essential services.

However, it warns “other services may be closed”, the “board/management [is] likely to be dismissed”, and organisations “may be dissolved and/or services transferred”.

It is unclear which services will be deemed “essential”. The paper suggests they could initially include all foundation trusts’ “mandatory services”.

These lists of services, maintained by Monitor, currently “include all hospital services”, the paper acknowledges.

Another issue raised is what powers Monitor will need. Details of the reforms issued by NHS chief executive Sir David Nicholson last month said it would no longer be able to veto foundation trusts’ decisions and remove their board members.

The fact the taxpayer has invested so heavily in the assets of foundation trusts is an argument for maintaining those intervention powers but some officials believe it would be a conflict of interest for the intervention powers to stay with Monitor when it also becomes the general economic regulator.

However, the management board paper notes the possibility of Monitor retaining those powers “to manage risk” and questions whether an “additional risk pool” should be built up for Monitor “to deploy pre-failure”.

This suggests it could provide money before foundation trusts fail, rather than only to maintain services during administration.

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