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What the health bill means for hospital trusts – and why it matters

Much criticism of the health bill has focused on GP commissioning. But changes to hospital trusts pose a threat to the NHS too.

Foundation Trusts were a key part of the previous government’s NHS reforms. Labour wanted all hospital trusts (acute and mental health) to become FTs and by last May about half of all hospital trusts had foundation status. All three parties went into the election in favour of FTs and the Conservative and Labour manifestos both had an aspiration that all hospitals would become FTs, but neither gave details nor a timetable. The Liberal Democrat manifesto did not mention Foundation Trusts, and neither did the Coalition Agreement.

Foundation Trusts are public benefit corporations. These are not-for-profit public bodies and differ from other public bodies, like the BBC or universities, by having a membership. Membership is drawn from the public (patients, carers or people living in the area served by the trust) and from staff, and members can stand and vote for FT governors. Foundation Trusts are legally owned by the government and are part of the NHS, but unlike NHS Trusts, FTs are accountable to the independent regulator Monitor. NHS Trusts are accountable to the local Strategic Health Authority and through that to the Department of Health and the Secretary of State for Health.

Foundation Trusts are often described as having “autonomy” or “freedom from the government” but the freedom works both ways: the government is not accountable for the performance of FTs. The argument was that the local population would be represented by the governors on the trust’s governing body and the executive board would be accountable to the governors; patients were supposed to pass complaints to their governors, and not to their local MP. In practice this rarely works and voters still involve their MPs.

Monitor determines whether a trust may become an FT and sets conditions that include balancing the books, meeting healthcare targets, and meeting financial targets like caps on private healthcare income and on borrowing. If an FT breaks these conditions Monitor can replace the management.

The health bill will abolish NHS Trusts on 1 April 2014. A trust that has not achieved FT status by that date will no longer be an NHS provider. A month ago, Health Service Journal reported that the Department of Health had brought in management consultants to advise on 22 trusts thought unlikely to achieve FT status before the deadline. The government has not ruled out privatisation, as happened in Hinchingbrooke.

For those trusts that do achieve FT status the future is not rosy. The role of Monitor is being changed completely. In the future it will be an economic regulator responsible for enforcing competition, and the recently appointed chair, David Bennett, has said that he wants the NHS to behave like a regulated market similar to the electricity supply industry. A month ago Monitor told FTs that rather than making the 4% “efficiency savings” necessary to comply with the government’s aim to save £20bn over 5 years, they have to make 6.5% “savings”.

The Bill will also abolish the current caps on private income and borrowing. With severe cuts coming to the NHS (hospitals will see a 1.5% cut in their income this year), FTs are expected to make up the shortfalls by expanding their private work, which will inevitably lead to a two-tier system. In July last year Lansley announced that FTs would no longer have access to the £5bn NHS capital budget, instead, they would have to borrow from a bank for capital projects like new buildings. The Bill will remove the “asset lock” on FTs meaning that if a trust defaults on its debt repayment a bank could sell off part of the trust.

Much criticism of the health bill has focused on GP commissioning. But these changes to our hospitals pose a threat to the NHS too. The bill must be amended to remove the artificial deadline on trusts becoming FTs, to reinstate trusts’ access to the NHS capital budget, and to protect NHS assets.

Richard Blogger writes about the NHS and social policy at NHS Vault.

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