News story

New measures to help NHS foundation trusts adopt best financial practice

Monitor is to strengthen its regulatory regime for NHS foundation trusts to help them live within their means and reduce excessive spending on agency staff and management consultants.

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The regulator proposes to increase its scrutiny of financial performance so it can take action sooner against providers that are not providing value for money for their patients.

This enhanced challenge to the track record of foundation trusts will be supplemented by a significant upgrade in the practical support Monitor offers to improve operational performance, through turnaround advice, leadership training and buddying arrangements.

Monitor will also shortly consult the sector on changes to its Risk Assessment Framework (RAF), which sets out the principles by which the regulator decides when to investigate foundation trusts, and what action to take to ensure they comply with the conditions of their licence.

This package of measures will enable Monitor to ensure that foundation trusts play their part in addressing the efficiency challenge set out by Jeremy Hunt, the Health Secretary, to make substantial savings to NHS budgets in 2015/16.

These include setting limits on the cost of employing agency staff in hospitals from July, and reviewing any proposed consultancy contracts worth more than £50,000 with immediate effect. The new approach will automatically apply to all foundation trusts found in breach of their licence on financial grounds.

In due course, the revised RAF would introduce more specific criteria for testing whether an foundation trust board is applying the standards of good corporate governance to ensure the trust is making best possible use of its resources. A series of new financial triggers would enable Monitor to take regulatory action earlier if an foundation trust is in deficit, failing to deliver its financial plan, or not providing value-for-money.

The proposal effectively re-introduces triggers that were in the RAF some years ago. The aim is to allow Monitor to intervene where there is uneconomical or inefficient use of resources, rather than just a short-term risk to solvency (and thus the continuity of services) as at present.

The regulator has already started a programme of two-day site visits to the 43 foundation trusts with the largest deficits and this is already showing encouraging results. For example, South Tees NHS Foundation Trust reduced a forecast deficit of £29.4 million to an outturn of £12.7 million in 2014/15.

David Bennett, Chief Executive of Monitor, said:

The scale of the operational and financial challenge facing the NHS means we cannot proceed with business as usual. Foundation trusts need to leave no stone unturned to improve their productivity, and we are taking a number of steps to help them meet this challenge.

Our revised regulatory approach will send a strong signal to all foundation trusts about what they should focus on, including reducing the costs of agency staff and management consultancy. It will also enable us to step in earlier where an foundation trust is in danger of getting into difficulty, or is failing to make maximum use of its resources.

This approach will complement the practical help and support we will continue to offer foundation trusts in order to reduce the risk that they get into financial difficulty or that we need to intervene formally.

Published 2 June 2015