Health and Social Care Act: Stakeholder feedback on Monitor's Licensing Regime

Now that The Health and Social Care Act has received Royal Assent.  The provisions remain to be brought into force by commencement orders (except for a limited few which are not relevant to this briefing note) but we now have clarity on the framework of the restructuring of the NHS.

During the passage of the Bill through Parliament, Monitor sought feedback from stakeholders on its role in the proposed licensing regime. We have been tracking the progress of this and have produced a number of articles covering:

Glimpses of the Future? Monitor Reveals Proposed Licensing Regime

Monitor Consults Further" … Stakeholders Engage!A Very Long Engagement: Monitor LicensingIt is clear from the title of our last flyer that there has been an extensive engagement process since the original Framework document – "Developing the new NHS Provider Licence: A Framework Document. In addition to the Framework, Monitor produced a host of consultation documents inviting stakeholder feedback in early 2012. Monitor's informal engagement exercise has now come to an end and Monitor has summarised the stakeholders' responses ahead of the formal statutory consultation which begins later in the year.

Summary of the feedback

Monitor received comments on the proposed licensing regime from a wide range of stakeholders. These included:

• Foundation Trusts
• NHS Trusts
• Independent providers
• Trade Unions
• Strategic Health Authorities
• Regulators
• Charities
• Financial Service Providers.

This mix of interests shows the wide impact that the new regime is likely to have.

Overall, most respondents were supportive of Monitor's proposed approach and many of the draft licensing conditions. Respondents felt that engagement at an early stage provided a useful insight into the proposals although further guidance would be important. In particular, respondents felt that the proposed conditions would enable Monitor to successfully carry out its principal duty; to protect and promote the interests of people who use health care services and also help Monitor to regulate providers in a proportionate and fair way.

Key themes

We have set out below the key themes raised by stakeholders in response to the proposed provider licence.

1 The regime will create lots of work and increase costs for providers

Providers are concerned that the licence conditions impose too great a burden on them both in terms of workload and financially. This is in addition to numerous existing regulatory requirements in the health sector. Monitor has indicated that the aim is to create a straightforward licence process and it is likely that most providers will meet the criteria without difficulty. In addition, it will review the requirements to see which are duplicated with other regulations. It is unlikely that Monitor will require providers to go through the process of providing evidence to meet a particular licence requirement that has already been met under another regulatory process. 

2 What happens if providers do not comply with the licence conditions?

Whilst providers recognise that there are likely to be sanctions for failing to comply with the licence conditions, it is unclear how these will be enforced. There are a number of sanctions under the Act, including fines, requests to rectify non-compliance and ultimately a decision to revoke a provider's licence. The Act requires Monitor to publish guidance on how the enforcement powers are to be used and draft guidance is to be published later in 2012. This will include information on when discretionary requirements are likely to be imposed, the considerations surrounding fines and the right of appeal by providers.

3 Who falls within the "fit and proper person test"?

In addition to CQC registration, Monitor has identified certain additional objective criteria to indicate whether an organisation should be regarded as fit to hold a licence. This includes a "fit and proper persons" test. There are concerns that the scope of this test is too wide; particularly given it must be complied with by "individuals and organisations that are able to materially influence the licence applicant's business". The independent sector has suggested that the requirement would make it difficult for providers to raise money for investment if it applied to investors and shareholders. Monitor has indicated it will consider this aspect over the coming months but will try to avoid imposing disproportionate costs on licence applicants.

4 Pricing data requirements too onerous?

Whilst it is recognised that higher quality and more consistent data will help Monitor to carry out its responsibilities properly, stakeholders have suggested that the process and cost of doing so may overburden providers, particularly for new or smaller providers. Monitor will be publishing more detailed cost guidance and areas for discussion later in the year. Considerations will include: avoiding duplication of data already collected by other organisations, how the proposals will differ from existing arrangements (e.g. as part of the Reference Costs process), how often the data should be collected, and the need for and funding of assurance reports.

5 How the Competition Oversight conditions work?

Under the Act the Co-operation and Competition Panel will become part of Monitor and the Principles and Rules of Cooperation and Competition will be absorbed into Monitor's regulatory framework. Stakeholders are keen for greater guidance on how Monitor's proposals on this will work in practice; e.g. what type of behaviour would be prohibited or allowed in the licence conditions? Again this is something Monitor is seeking to develop later in 2012. Monitor has however noted that the Competition Oversight regime will continue to evolve as new case decisions are made. 

6 Cooperation requirements duplicative?

Stakeholders felt that this is another requirement which is duplicative, in this instance requirements to cooperate by coordinating care or sharing information which already exists in the NHS standard contracts and the CQC registration. Greater detail on the kinds of cooperation required under the licences and the type of information Monitor requires to be shared is to be considered further by Monitor. It has however indicated that there are no current plans for a requirement on providers in relation to the compatibility of IT systems.

7 Continuity on service failure and credit and debt proposals.

This aspect of the licence conditions received a great deal of input from the stakeholders. Essentially, stakeholders want greater detail on how Monitor would interpret and enforce the Continuity of Services conditions. It is not clear exactly what services the requirement would apply to. It was proposed that this would only be Commissioner Requested Services (CRS). Monitor is developing guidance for commissioners on how to identify CRS which will include factors such as clinical impact, the distance patients travel for those services and the capacity for providers to offer similar services. It is important to remember that under the Act, commissioners may be required to contribute to a risk pool. Monitor considers that the scale of contributions could reflect the number of services commissioners designate as CRS.

Monitor's original engagement documentation suggested that organisations providing CRS should be required to secure "investment grade" credit rating from one of the three main credit rating agency's: Standard and Poor's; Moody's Investors Service; and Fitch Group. It is understood that Monitor have commissioned research looking at whether or how a system of external credit ratings can be applied to licence holders. The research includes considering the application of a cap on the level of debt a provider of CRS would be allowed. Monitor has not confirmed whether credit rating or the debt cap will feature in its statutory consultation exercise but it is understood Monitor is considering the costs and benefits of these proposals.

8 FT regulation and the role of a Governor's Advisory Panel

Under the Act, Monitor will regulate foundation trusts through the licence. Where possible and appropriate, Monitor intends that these governance conditions will represent similar obligations to those imposed under Monitor's current Compliance Framework.

Concerns have been raised as to who could act as turnaround plan assurers under the licence. The draft conditions say that an assurance report could be provided by someone Monitor approves in writing. This is left deliberately open as Monitor has suggested other sources of assurance, such as peer review can be very important. Monitor is therefore exploring the scope of this condition.

The respondents were split down the middle as to the creation of a Governor's Advisory Panel. Monitor is currently undecided on whether or not to put the panel in place however it has advised that the panel will only give independent advice on whether the foundation trust is breaching the terms of the constitution, or other relevant requirements of the Act.

9 Fee charging for FT Registrar function

Foundation trusts were unclear on why Monitor would have to charge a fee for the Registrar function. Monitor anticipates the costs of this function will be small as the Registrar role only requires Monitor to collect, store and make available certain information about foundation trusts. The fee is recoverable by Monitor under the Act however Monitor wishes to reassure foundation trusts that it wants to ensure the administrative costs associated with the collection of fees are minimised.

What happens next?

This feedback from Monitor marks the end of the informal stakeholder engagement process. Monitor will consider the input from the stakeholders, and in particular those themes outlined above, to develop its proposals over the coming months.

As part of the statutory consultation period later in 2012, Monitor will issue revised proposals and further information including publishing an impact assessment on the licensing conditions. In addition, it is expected that the Department of Health will provide its own engagement documents for consultation on specific issues e.g. exempt providers.

We will be monitoring the position and will send out further updates, so watch this space!  

How can we help?

Our commercial team would be happy to assist you with understanding the Act and the initial engagement including Monitor's proposed Licensing Framework as and when it evolves. Importantly we can assist with what this may mean for your organisation, whether it is an FT, NHS Trust or independent provider. We can advise you on how to make preparations for the future and what the main issues are. We can also provide training and development support for FT Boards of Directors and Councils of Governors to help prepare for the new healthcare and governance landscapes.