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Monitor and a new provider era 1 What is Monitor’s new role?

Monitor’s role has been substantially expanded by the Health and Social Care Act. Previously Monitor approved and oversaw NHS foundation trusts. Now it will also:

  • issue regulatory licences to providers (NHS, independent or third sector) of NHS-funded services
  • prevent anti-competitive behaviour deemed to be against the interests of patients
  • ‘support’ commissioners to provide ‘continuity of service’ at failing trusts
  • set prices for NHS-funded care
  • ‘enable’ integration

Monitor says: ‘We will use the licence to carry out our main duty – to protect and promote the interests of people who use health services. We will do this by promoting the provision of services that are economic, efficient and effective, and which maintain or improve quality.’

David Stout (DS), deputy chief executive of the NHS Confederation says: ‘The role of the economic regulator – now rebadged as sector regulator – gives it greater importance from a commissioning perspective than its old role.’


2 Will Monitor act towards CCGs as policeman or partner?

Guidance is due out later this year on what constitutes anti-competitive behaviour that is not in the interests of patients and this will reveal more about what the dynamic between Monitor and CCGs will be.

Monitor says: ‘The act makes it clear that when we carry out our functions, including taking action against anti-competitive behaviours, we must put the interests of patients first.’

DS says: ‘The powers that Monitor has in relation to CCGs are relatively limited, but quite significant. So if, as I understand it, Monitor found CCGs had not set a contract fairly, it has the power to stop the contract. That will depend on whether Monitor will seek to police, or review things only when it gets complaints.’ He adds: ‘Monitor is in a phase where it is being very reflective and avoiding being too specific.’

Stout says that procurement regulations, currently being drawn up by the Department of Health, will become a ‘rule book’ for CCGs and will direct ‘to some extent the level of intervention’ Monitor might take.

‘At the provider end, anti-competitive behaviour would be collusion between providers. This is less about price-fixing – which operates in a normal market where OFT would look out for, for example, airlines coming to an undocumented agreement on pricing. In the new world, Monitor itself will be setting prices. But it might be hospitals saying ‘you do hips, I’ll do knees’ – which could segment the healthcare market. The judgment for Monitor is not whether something is anticompetitive in its own right, but whether it is anticompetitive – and having an impact on patient care.

‘On the commissioner side, anticompetitive behaviour is procuring from organisations without proper consideration for what type of procurement methods to use and favouring one organisation over another. It could be CCGs commissioning from themselves.

‘Anticompetitive behaviour could also be deciding to prop up the local acute trust because commissioners don’t want the independent sector to come in.’

Stout says it will be important that Monitor and the NHS Commissioning Board – which has main performance oversight of CCGs – do not ‘fall over each other’. ‘CCGs will not want double jeopardy with the NHS Commissioning Board and Monitor sitting on each shoulder.’


3 Will Monitor force CCGs to prop up failing providers?

The act gives Monitor a ‘continuity of service’ duty to ensure patients are guaranteed ‘essential’ services , should a provider run into financial ‘distress’. The regulator will be able to order providers to appoint turnaround experts, or could appoint a ‘continuity administrator’ to take over the provider’s affairs and work with commissioners to guarantee ongoing core services. Monitor will also be able to compel providers and commissioners to contribute to a ‘risk pool’ to help financially struggling trusts. This would act as an incentive, it says, to all parties working to prevent problems and thereby reducing the levy they pay to the risk pool.

Monitor will also be able to order commissioners to pay a higher-than-tariff price for services, if providers can convince the regulator a local price variation is needed because current income is too low to cover costs of providing popular and highly valued services. ‘Commissioners will be required to fund local modifications out of existing budgets, at least in the short run,’ says an independent report commissioned by Monitor on how the scheme would work. Local variations should be exceptional, not be allowed to prop up inefficient providers, and would only be approved after all alternatives had been exhausted.

The regulator is also considering giving commissioners ‘step-in rights’, as an alternative to continuity of service responsibilities, to take over failing services.

Monitor says: ‘In the first instance, the continuity of service regime outlined in the act gives Monitor a duty to prevent providers from taking actions that could undermine their continued ability to deliver services. However, it is commissioners, overseen by the NHS Commissioning Board, who will have a primary responsibility for ensuring the continuity of service provision.’

DS says: ‘What the levy [for the risk pool] will be and the balance between providers and commissioners, is yet to emerge. It’s not just what the scale of the levy is, but who it falls to – and ultimately everything falls to commissioners because that’s where the source of income [for providers] comes from. So even if you’re levying providers for a risk pool, the commissioner is the route source of that funding. The price setting that Monitor does will have to take the levying into account. If you set it [the levy] too high there’s a risk that you’re taking too much money out of direct patient care and perversely sending some providers or commissioners into financial problems. It needs thoughtful design.’


4 Should some providers (such as GPs) be exempt from the licensing regime?

The act allows for some providers to be exempted from Monitor’s licensing ‘to ensure the regime is proportionate’.

Some stakeholders have told Monitor that if GP providers were exempt, this would exclude potential competitors from Monitor’s view. Primary (and social) care also play a major role in integrated care, but if GP providers were exempt, this could affect Monitor’s ability to meet its duty to promote seamless working, stakeholders have also said.

Monitor says: ‘The DH is deciding which providers of NHS-funded care will be covered by the licence. At the moment, most providers of social care will not be within our remit, although we may cover social care providers who are delivering NHS-funded services, subject to DH decisions on the exemption regime. The act also gives the Secretary of State the power to extend our remit to cover adult social care at a future date.

DS says: ‘It’s a big unanswered question. We don’t have a firm view on where the line should be drawn, but we need to know. While each [GP] provider may be quite small, the summation of it is quite large and obviously the building block of the provision of healthcare. If you include them, are you distracting resource into something that doesn’t add value? Every regulatory system should be proportionate and the value it adds should be higher than its cost.’


5 Will Monitor just drive down prices at the expense of quality?

Monitor will take over from the DH responsibility for price setting for NHS-funded care. It must jointly produce, with the NHS Commissioning Board, a national tariff, probably from 2014/2015.

Monitor says: ‘The national tariff should drive fairer and more accurate pricing, which will benefit patients and the public… It is part of our remit to promote service provision in which the quality of care is maintained or improved, and we will think about how pricing might help.’

DS says: ‘I think Monitor’s duty to maintain or improve quality of care is a good one because without it, everybody would worry that it would be just driving price down with no eye to quality.

‘It needs to set a price that’s fair, that properly remunerates providers, that maintains and improves quality, but doesn’t bankrupt commissioners or the taxpayer.

‘The statutory responsibility to the taxpayer is a little opaque. The legislation doesn’t say, but it’s obvious in a cash-strapped system it would be very unwise to set prices in a way that is unaffordable.

‘On the quality question, there must be a connection between the CQC’s role in dealing with unacceptably low quality and Monitor’s role in setting prices, based on a duty to maintain or improve quality. They will have to work in tandem and not pull in opposite directions.

‘They have done a first piece of work that says the current pricing methodology  isn’t robust – bearing in mind that the current tariff only applies to around 40% of healthcare. Is it too focused on episodic care, which helped us bring down waiting lists, rather than [enabling the NHS to] run efficient services? There’s a design question here.

‘Realistically, to start with they’ll inherit it and over time they’re going to have to make it stronger. You have to design it, have information to underpin it, and test it before you can implement it. Much of this is going to be three, four or five years away, so let’s not over-expect.’

Rebecca Norris is a freelance journalist

Monitor information and position statements taken from Stakeholder engagement on the new NHS provider licence: a summary of your feedback, published online 3 May 2012 and the section on its website about its new role can be viewed here. The questions posed by CCG leaders were from a workshop organised by The NHS Alliance/NAPC.