Health Select Committee Inquiry foundation trusts and monitor

Royal College of Nursing submission

1.0 Executive Summary

Our submission focuses on a survey conducted in 2007 by the RCN. The results of the survey of RCN members recommended the following:

  • RCN members view local control of an NHS Foundation Trusts (NHSFT), with the full engagement of community and staff constituencies in their governance, as one of the greatest benefits of Foundation Trust (FT) status. Many NHSFTs have made significant improvements in membership engagement.
  • However, there is also a strongly expressed concern that too much emphasis on a ‘big business ethos’ could squeeze out patient, public and professional engagement.
  • As NHS FTs reach critical mass, discreet policy interventions are required to strengthen governance arrangements, promote best practice public patient involvement and encourage partnership working.
  • Strategic Health Authorities and Local Authority Oversight and Scrutiny Committees may need a much clearer role and authority if they are to have constructive relationships with NHSFTs in which essential information is shared openly and local agreements on priority services are developed in partnership.
  • RCN and other staff side organisations have a role to play in encouraging more members to get involved as Governors. That would ensure stronger relationships between Governors and staff side organisation representatives. As NHSFTs grow and the market matures the RCN believes that there will be an increasing need to ensure the integrity of democratic representation within these organisations and within the wider NHS.
  • NHSFTs with their early exposure to Payment by Results (PbR) and a more rigorous financial framework have led to more consistent financial information and a better balance of income/expenditure. This has brought an increasing awareness of the costs activity, although there is concern that the full contribution of nursing remains largely invisible.
  • Many respondents saw benefits from adopting a more business like approach to organisational development and service management. However, where NHSFTs were disproportionately focused on costs, this had a detrimental impact on staff morale and clinical engagement.
  • The emerging potential for successful NHSFTs to merge with and takeover failing NHS Trusts holds the prospect for creating provider organisations whose size and revenue will far exceed anything that we have previously seen in the NHS.
  • The RCN remains concerned that competition between providers and the emergence of FT systems within community services will present opportunities to dispose of and re-provide services in a manner which prioritises short term income above the sustainability and quality of services.

2.0 Introduction

With a membership of over 390,000 registered nurses, midwives, health visitors, nursing students, health care assistants and nurse cadets, the Royal College of Nursing (RCN) is the voice of nursing across the UK and the largest professional union of nursing staff in the world. RCN members work in a variety of hospital and community settings in the NHS and the independent sector. The RCN promotes patient and nursing interests on a wide range of issues by working closely with the Government, the UK parliaments and other national and European political institutions, trade unions, professional bodies and voluntary organisations. The RCN welcomes the opportunity to make a written submission to the inquiry of the Health Select Committee.

2.1 Since the inception of NHS Foundation Trusts (NHSFTs), the RCN has adopted the view that each application for Foundation Trust (FT) status should be considered on its merits.

2.2 Following on from previous work with members and staff in FTs, the RCN carried out a survey on the progress of NHSFTs between June and July of 2007. The survey had two distinct parts:

  • Firstly, a questionnaire on a range of issues related to the development and operation of NHSFTs was made available to RCN activists and members through the RCN website.
  • Secondly, semi structured interviews with RCN activists and staff were conducted based on the issues raised within the questionnaire. In combination, this approach gathered evidence from 46 of the 54 NHS Foundation Trusts that were authorised when the survey commenced.

2.3 Based upon this evidence the RCN is able to identify some key trends and issues which we believe should be considered and addressed as part of the future development of these crucial NHS provider organisations. These key trends are divided into the four areas outlined below.

3.0 Governance and Engagement

Given the size and potential influence of NHSFTs the RCN believes that there is an increasing need to ensure the integrity of democratic representation within these organisations and within the wider NHS. In a very real way, RCN members view local control of an NHSFT, with the full engagement of community and staff constituencies in their governance, as one of the greatest benefits of FT status.

3.1 There is also a strongly expressed concern that too much emphasis on a ‘big business ethos’ could squeeze out patient, public and professional engagement. Some suggest that NHS values are being squeezed in a similar manner. As NHS FTs reach critical mass, discreet policy interventions are required to strengthen governance arrangements, promote best practice public patient involvement and encourage partnership working.

3.2 SHAs and Local Authority Oversight and Scrutiny Committees may need a much clearer role and authority if they are to have constructive relationships with NHSFTs in which essential information is shared openly and local agreements on priority services are developed in partnership RCN and other staff side organisations have a role to play in encouraging more members to get involved as Governors. That would ensure stronger relationships between Governors and staff side organisation representatives. As NHSFTs grow and the market matures RCN believes that there will be an increasing need to ensure the integrity of democratic representation within these organisations and within the wider NHS.

4.0 Effects of Prioritising Financial Performance

NHSFTs with their early exposure to PbR and a more rigorous financial framework have led to more consistent financial information and a better balance of income/expenditure. This has brought an increasing awareness of the costs activity although there is concern that the full contribution of nursing remains largely invisible. Many respondents saw benefits from adopting a more business like approach to organisational development and service management. However, where NHSFTs were disproportionately focused on costs, this had a detrimental impact on staff morale and clinical engagement.

4.1 The Department of Health have given a strong commitment to achieving 100% provision of secondary NHS services through Foundation Trusts by 2009. By October 2007, only 30% of the NHS Trusts eligible to become NHSFTs had done so. At the same time, 10% of applications had failed across England but in some areas that figure is higher. For example, in the West Midlands SHA area 30 % of applications have “failed” and in the East Midlands SHA area 25% of applications have “failed”. 

4.2 Monitor have published guidance on “mergers” and “takeovers” of “failing” organisations by NHSFTs and the first mergers have already been authorised. In Birmingham, for instance, the Heart of England NHSFT took over the failing Good Hope Hospital in the first merger to take place under the provisions of the Monitor guidelines in early 2007. The RCN has noted the growing potential for “takeovers” and “mergers” as a means of overcoming “failure” in NHS provider organisations.

4.3 This potential appears to be mainly focussed upon the activities and freedoms of NHSFTs and their capacity to drive the financial performance of the NHS. At the same time, as the numbers and rates of failure in NHSFT applications rise there will be an increasing potential for the Department of Health to keep to their commitment to achieve a 100% NHSFT economy in secondary care by 2009 through mergers and takeovers. RCN Policy Unit forecast the probability of this scenario in a publication from January 2007.

4.4 It is the view of Monitor that financial performance in NHSFTs is strong in comparison with their equivalent NHS Trusts and that this is borne out by the results of the Healthcare Commission’s Annual Health Check ratings for 2007 . The RCN believe that this is largely attributable to the process by which NHSFTs are selected and the investment in them in order to improve their financial management systems to meet the diagnostic requirements of Monitor.

4.5 RCN members who responded to our survey believed that this had led to a trend whereby there is an increasing and inevitable gap in financial performance between NHSFTs and NHS Trusts. Respondents suggested that the greater “freedoms” of these more modern organisations may have a detrimental effect upon traditional NHS Trusts who are at a disadvantage in an increasingly competitive provider market. The survey also portrayed a growing hierarchy within NHSFTs whilst those at the bottom end of the continuum are becoming increasingly pressured to raise their financial performance or face a worrying and uncertain future.

5.0 Payment by Results and the Drive for Increasing Efficiency

Payment by results (PbR) is a case mix based activity payment system which rewards providers 'in year' for patient activity . Foundation Trusts were the first providers to pilot the tariff system and the related Healthcare Resource Groups (HRGs) and were able to model the impact of this system on income and business stability although one of PbR’s prime objectives was to act as a focus for improving the quality of care.

5.1 In its recent consultation on the future of PbR, there was a heavy focus on the importance of clinical engagement for the future development of PbR. Clinical engagement is essential to ensure that the powerful incentives within PbR are focused on improving care pathways and not simply used as a means of reducing costs .

5.2 There were a high proportion of respondents who said that they did not know what impact PbR was having upon their services. It is of great concern if such a high number of respondents did not understand PbR or its stated objectives, particularly given its important links to financially incentivising certain care pathways. Without clinical engagement in the collection of activity data; in the analysis of care costs; or in the development of a strategic response to Trust activity data, PbR becomes a focus for cost cutting rather than improving the patient experience and the quality of care.

5.3 Moreover, failure to engage clinicians can lead to poor data quality and inaccurate reporting of activity on the basis that it may be seen to be a finance driven agenda rather than an opportunity to innovate in care delivery.  Respondents cited several reasons for this lack of familiarity with PbR in their follow up comments, including;

  • Their NHSFT was only recently authorised and had not been part of the PbR pilot scheme.
  • There had been little or no communication from managers regarding PbR and national tariffs and their relevance to patient services.
  • Financial information, including PbR issues was not readily shared with clinical teams, FT members or staff side organisations because of the sensitive nature of such information and the business interests of the NHSFT.

Respondents generally felt that none of these reasons offered an acceptable explanation of the lack of understanding that exists about PbR and the implications for the NHS.

6.0 Developing New Services

Our survey showed that RCN members have serious concerns that too many NHSFTs do not effectively communicate their service plans to nurses, patients and FT members. Our members do, however, accept the need for FTs to generate financial surplus and to meet cost improvement targets.

6.1 NHSFTs have exceeded expectations in terms of achieving cost reduction targets. National tariffs established under Payment by Results assumed a cost improvement saving of 2.5% per year, yet in 2006 the NHS Foundation Trusts had achieved a cost improvement saving of 3.0% of operating costs.  Achieving these efficiency targets is clearly crucial to NHSFTs and any NHS Trusts that aspire to Foundation status. Our survey showed that RCN members felt that planning to achieve these targets was an activity which took place at Board level, whereas the process of achieving cost efficiency savings depended almost entirely on the activity of nurses, managers and practitioners at clinical team level.

6.2 The overall impression amongst RCN members was that this fact was insufficiently appreciated at Board of Director level. As a result, although RCN members reported improvements in the sharing of operational planning and service development plans, they did not believe that most NHSFTs engaged sufficiently with stakeholders on issues relating to cost improvement plans (CIPs). Issues that were raised by respondents included;

  • Service development plans are generally more transparent, accessible and more readily available than financial performance information within most NHSFTs.
  • RCN members are concerned about lack of practitioner engagement in the development and planning process of CIPs and the organisational levels at which crucial decisions are being made in NHSFTs. This creates a potential for “top-down” management in achieving cost savings and efficiency targets with little or no ownership at clinical team level.
  • Where CIPs generate increasing levels of financial surplus, RCN members believe that these monies should be invested in developing services and that NHSFTs have a responsibility to communicate their investment plans more clearly to their members.

Royal College of Nursing
June 2008