Part 1: Monitor’s General Duties and Licensing
The Health and Social Care Act, after much debate, has now received Royal Assent. The provisions remain to be brought into force by commencement order (except for a limited few which are not relevant to this briefing note) statutory order but we now have clarity on the framework of the restructuring of the NHS.However, a range of detail is still missing and requires further regulations, guidance and operational development.
Monitor now sits clearly in place as the regulator of the provision of NHS services and also has some functions in relation to regulation of commissioning. It may also be given the role of regulator of adult social care in due course. The Competition Commission emerges as the main “appeals” body. There are however some areas in which the Secretary of State and the National Commissioning Board (NCB) retain important roles. This is one of two papers outlining the main aspects of the regulatory regime and the roles of the players in this regime. This paper addresses Monitor’s roles and general duties and licensing. The second paper covers competition, pricing and the insolvency regime.
Monitor’s roles and general duties
Monitor will continue to authorise new NHS Foundation Trusts (FTs) until there are no more NHS Trusts. It has also been given responsibility for continuing to oversee the governance of FTs for a transitional period. However, Monitor will also have the following additional roles: licensing providers of NHS services; competition regulation; and setting prices for services and intervening in the case of insolvency of providers. It will also have powers to make charges on providers and commissioners.
In the light of its new role, Monitor has a range of new general duties and matters to which it must have regard. Its main duty is to exercise its functions to protect and promote the interests of health care services by promoting the provision of economic, efficient and effective services which maintain or improve the quality of those services. Other duties include exercising its functions with a view to preventing anti-competitive behaviour in the provision of NHS servicers which is against the interests of service users. It must also exercise its functions to enable integration within NHS services, and between NHS services and social services, when this would improve the quality of health services and reduce inequalities in access and outcomes.
However, following heavily aired debate in the passage of the Bill regarding whether Monitor should be promoting competition from the private sector, the Bill now states that Monitor must not exercise its functions for the purpose of causing a variation in the proportion of NHS services provided by public and private sector providers. This is not to say that Monitor’s actions may not have this effect but this must not be the purpose of the actions.
All persons providing health services for the purpose of the NHS must hold a licence from Monitor unless they are exempted under regulations yet to be issued. Regulations will also deal with who should be licensed when two organisations act in different capacities in providing a service.
Monitor has stated that the licensing regime will be its key tool for it to perform its new role and ensure that benefits for patients and service users are the focus of its regulation. It has also indicated that there it will run an integrated licensing process with the CQC, although each organisation will be separately responsible for their own areas of regulation.
Monitor must publish licensing criteria and any subsequent revisions must be approved by the Secretary of State. Where an application for a licence is refused, or a licence is revoked, there is a right of appeal to the First Tier Tribunal. However, existing NHS FTs will be deemed to have automatically satisfied Monitor’s licensing requirements and thus will move over to the new licensing regime automatically.
Monitor can impose licence conditions in the licences which are classed as standard conditions and special conditions. The Act contains limitations on the kind of condition that can be imposed and also examples of areas that might be covered. There is a specific prohibition on inclusion of a condition that requiring a licence holder to give another licence holder access to its facilities; an area which has been of much concern to providers. Monitor is allowed to impose a condition that the licence holder will pay fees so that Monitor can recover its costs in relation to exercising its licensing functions.
The Act envisages licences will all contain standard conditions, although different standard conditions may apply according to the nature of the licence-holder, the services being provided or the areas in which they are provided. The first set of standard conditions are to be developed by Monitor and consulted on with the Secretary of State, the NCB, PCTs (and CCGs if in place) and such other persons as Monitor thinks fit. The Secretary of State retains a reserve power to direct that the conditions are not adopted.
Once the standard conditions are adopted, Monitor can only modify them after notifying relevant licence holders and others. If certain levels of objection are received from licence holders, and Monitor wishes to proceed, the modification must be referred to the Competition Commission. The legislation sets out a detailed process for review of the modification and the making of changes, if appropriate, with the Competition Commission having the final say on the process.
Monitor has already carried out two rounds of preliminary stakeholder engagement to assist it in developing the standard conditions. There will be further consultation on the proposed conditions in accordance with Monitor’s obligations discussed above.
Monitor’s engagement exercise envisages that the standard conditions will be divided into: general licensing conditions; pricing conditions; competition and oversight and integration conditions; Foundation Trust governance and oversight conditions; and Foundation Trust enduring conditions. The last two categories will obviously only apply to FTs. The FT governance and oversight conditions will only apply during a transitional period during which Monitor must impose licence conditions if it considers that the governance of an FT is such that it will fail to comply with its licence conditions.
The engagement documents are available on Monitor’s website and are well worth referring to understand developing thinking. We will be issuing further updates on licence conditions in due course.
Monitor may also impose special conditions in licenses which apply to a particular licence-holder only. This can be done with consent of the licence holder and prior notice must be given to a range of persons; including the Secretary of State and the NCB. Where a licence holder does not consent to a proposed special condition, Monitor may make a reference to the Competition Commission broadly to determine whether a special condition is appropriate in order to remedy any detriment to the public interest if the licence is granted (or continued).
Monitor has a range of remedies for breach of the requirement to hold a licence, breach of any licence conditions, or for failing to provide requested by Monitor in connection with its regulatory functions. Discretionary remedies comprise of: requiring payment of a monetary penalty up to 10% of turnover of the relevant person; imposing steps to be taken to ensure compliance (a “compliance requirement”); or to restore the position that would have applied had there been no breach (a “restoration requirement”). Monitor can also obtain undertakings from the offender to take specified steps to remedy the situation. Where Monitor imposes conditions on a FT to reduce the risk of the FT breaching its licence under the transitional arrangements referred to above, Monitor may also suspend, remove, or disqualify directors and governors in the event of breach of the new conditions.
Where Monitor has imposed certain conditions relating to securing continuity of care, and is taking action under those conditions due to concerns that those services are being put at serious risk due to health services configurations, it must notify the NCB and relevant commissioners. The NCB and the commissioners must have regard to the notification in arranging for the provision of health services. Monitor must publish annually a list of all notifications that it has given during the year.
How can we help?
We can provide training on the new regulatory framework and advise you on the implications of the new regulatory regime on your organisation.
As Monitor consults on the new licence standard conditions we can advise you on how the proposals may affect your governance arrangements and your activities, the representations that you may wish to make in response to the consultation and on any changes that you may wish to implement to reflect the new licensing arrangements.
Independent sector providers will need to look closely at their structures for their NHS work in order to minimise or avoid adverse knock on impact of the licensing and insolvency arrangements (please see our second flyer on regulation) onto their non NHS business and we can support you in this.
We can also provide training and development support for Boards of Directors and Councils of Governors to help prepare for the other changes which are being introduced by the Health and Social Care Bill.