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Ten things to know about foundation trusts

Miranda Griffin gives a brief guide to Foundation Trusts and how their ‘business savvy' nature has implications for GPs

1) The difference between an NHS trust and a Foundation Trust is fundamentally one of autonomy

The idea behind the Foundation Trust policy is for hospital trusts to operate with a much higher degree of independence -a degree of autonomy which is set to increase. They are not accountable to the SHA for their performance and are intended to be more locally accountable, with services which are more responsive to the needs of the local community. They are part of the NHS but have a different legal basis to NHS trusts, as independent 'Public Benefit Corporations'.

Foundation Trusts have been given much more financial and operational freedom than other NHS trusts with the idea that it will allow them to decide their own strategy and improve the way services are run.

Under the White Paper there will be an even greater level of commercial freedom including a lifting of the cap on treatment of private patients (currently set at the level of whatever percentage of the trust's turnover was private patient activity in 2002/3, ranging from 0.1 to 30% with the vast majority at less than 2%).

The idea behind raising the cap is not necessarily to increase massively direct services for private patients, but rather to enable joint ventures and develop new commercial opportunities.

2) Foundation Trusts are intended to be more locally accountable

Anyone who lives in the area, works for a foundation trust, or has been a patient or service user there can become a member of the trust. These members elect the board of governors.

But according to David Stout, Director of the PCT Network at the NHS Confederation, this could potentially undermine a consortium's claim to be the representative of patients locally: "Through their governance strategy Foundation Trusts have a system of membership. Patients are members of Foundation Trusts and that gives the trust some legitimacy in how they operate within the health system – they can say they genuinely represent patient views. That's potentially a challenge to commissioners who also claim to represent patient interests and patient views.

"If you as a commissioner want to redesign services in a way that takes care out of the hospital and puts it closer to home in general practice or community services and the hospital is resistant to that change then their well-developed system of patient representatives might be a challenge to your decision making."

3) They account for more than half of all acute hospitals

There are currently 132 Foundation trusts including Community Foundation Trusts.

In England they now account for more than half of acute hospitals, providing over half of all NHS hospital and mental health services.

4) The Government's timetable is for all NHS Trusts to become Foundation Trusts by 2014

The process of becoming a Foundation Trust involves firstly satisfying the local SHA that the trust is ready to apply, then Monitor (see below) assesses their capability to be self governing.

But there is a question mark over whether the 2014 deadline is achievable. David Stout says: "It's hard to see how some NHS trusts will become financially viable in that timeframe. The Monitor test is quite stringent especially in terms of their financial future sustainability and some are going to find that very challenging."

5) Being a Foundation Trust implies having a higher level of business skills

As Trusts who have achieved Foundation status have had to undergo a rigorous assessment procedure the implication is that they are more business minded.

According to David Stout: ‘Being a Foundation Trust implies a certain amount of business savvy as you have the skills to stand alone. They may be more skilled at contract negotiation than a normal trust.

‘GPs will need a good understanding of how the contractual frameworks within the NHS operate, what controls are put into the contract, and how this area will develop in the future if they are to hold their own in negotiations.'

6) They can retain surpluses but must reinvest them in their own organisation

Foundation Trusts can retain financial surpluses made during the financial year but these must be reinvested back into their own services to drive innovation.

They are legally required to use the assets they hold in ways that promote their primary purpose of providing NHS care to NHS patients.

They also have the freedom to borrow money (the present limits on the amount they are allowed to borrow are set to disappear), decide on capital investment and enter into contracts.

This means however that if a Foundation Trust has financial problems it can't turn to the SHA for help as it is supposed to be financially independent.

They are not required to break even each year although they must be financially viable and realistically will need to make a profit most years.

7) Monitor will continue to regulate Foundation Trusts as part of its wider responsibilities

Foundation Trusts are accountable to their members and governors, and to Monitor, the independent regulator, which was established in January 2004.

But Monitor's duties are changing, the breadth of its responsibilities is becoming wider and it will no longer relate just to Foundation Trusts, but also to any other provider of health care including the private or voluntary sector. Monitor will have fewer performance management responsibilities as part of a loosening of direct management of foundation trusts which will become much more self-governing.

Currently, Monitor publishes two risk ratings for each NHS foundation trust: one for governance (a ‘traffic-light style' rating) and one for finance (rated 1-5).

In future Foundation Trusts will be accountable to a new financing facility for the dept owed to government (the ‘public dividend capital' which is available to Foundation Trusts) and their financial risk rating will be done on the open market in the way it is done in the commercial sector.

They will still be subject to Care Quality Commission inspection and investigation and will have to meet outcome requirements in the same way that all organisations working in the NHS will.

8) Foundation Trusts have more freedom to be innovative

The loosening of central control allows Foundation Trusts to be more flexible than NHS trusts. Foundation Trusts do not just cover hospitals, there are also mental health foundation trusts and there is a number of community services Foundation Trusts being developed.

Foundation Trusts have been involved in a huge amount of innovation, according to Sue Slipman, director of the Foundation Trust Network: "There is innovation in patient care, large numbers of joint ventures, new companies and new products for patients and partnerships with the voluntary sector. There's a lot going on with community and rehabilitation work and in some places they are playing a large role in regeneration of an area."

9) They may be more efficient at coding and therefore charging

Acute services are funded through the national tariff based on how care is coded. If trusts get more effective at coding they will manage to find more complexity in the services and code them more effectively and as a result will be paid more. Because Foundation Trusts are more business minded they are likely to have more efficient coding processes and the more efficient they are the less likely they are to miss things they could charge for.

10) Conflict of interest may become an issue

According to David Stout: ‘There are questions about involving consultants from one provider at the expense of other providers when designing a new service– is there a competition issue? Is it at odds with the appropriate use of competition in delivery of services? To avoid this you have to be open to potential alternative providers being part of the process as well as existing providers.

He also raises the possibility of problems if the make-up of a consortium's board is to include consultants. ‘It's important to be aware of potential conflict of interest in terms of driving work to their own Foundation Trust. You will need to have means of managing this. ‘

Further information

Miranda Griffin is a freelance journalist