In this article we explore Monitor's roles in investigating anti-competitive behaviour, the remedies that it can impose and its responsibility for setting the national pricing tariff. This article also examines what happens in the event of insolvency of providers of NHS services.
The Health and Social Care Act, after much debate, has now received Royal Assent. The provisions remain to be brought into force by statutory order (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. 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 NCB retain important roles. This is the second of two papers outlining the main aspects of the regulatory regime and the roles of the players in this regime. The first paper addresses Monitor’s roles and general duties and licensing. This second paper covers competition, pricing and the insolvency regime.
Monitor is given roles in relation to competition regulation both on the provider side and the commissioner side of the NHS.
Monitor is given concurrent functions with the Office of Fair Trading to investigate anti-competitive practices (e.g. agreements that restrict competition) and abuses of dominant positions, both under UK national competition law and EU treaty law. It can also impose remedies in respect of breaches of competition law. This includes levying fines and obtaining undertakings as well as applying to court for disqualification of directors in breach of competition law.
Monitor is also giving powers under Part 4 of the Enterprise Act 2002 to make market investigation references to the Competition Commission if it has reasonable grounds for suspecting that any features of a market in health services prevent, restrict or distort competition.
The Act also makes clear that merger law under Part 3 of the Enterprise Act applies to FTs where any activities of an FT cease to be distinct. This applies whether the merger of the activities is with those of another FT or NHS Trust or a non NHS entity.
The Act gives the Secretary of State power to impose regulations on the NCB and CCGs to ensure that those bodies adhere to good practice in relation to procurement and to protect and promote patient choice and do not engage in anticompetitive behaviour against the patient interest. This may include regulations imposing requirements relating to competitive tendering of services and the management of conflicts between commissioners and providers.
Monitor is given the power to investigate non-compliance with the regulations. Remedies for non-compliance include power to direct the NCB or relevant CCGs to put in place arrangements to prevent breach of the regulations and to take various steps to remedy noncompliance. Monitor can also accept undertakings to ensure compliance or remedy the situation. Regulations may enable Monitor to declare any non-compliant arrangements are ineffective.
We await details of the regulations to see how they will fit with EU procurement law and how this may add to the multiplicity of ways in which procurement challenges may be brought.
Monitor will be responsible for setting the national tariff. This includes responsibility for the services subject to national tariff, the methodology for setting prices, the actual national prices and the methodology which is to be used for any local variations of tariff (see below). For services not specified in the national tariff, the prices for those services will be determined by the rules set out in the national tariff.
Bearing in mind the significance of the tariff to the whole health system, there are detailed provisions dealing with the development of the tariff. Monitor must reach agreement with the NCB on its proposals before consulting with CCGs, providers and such other persons as Monitor considers appropriate. Where objections from providers or commissioners to the methodology for determining a tariff exceed certain thresholds, Monitor cannot proceed without referring the matter to the Competition Commission to determine whether the methodology is appropriate. If it is deemed inappropriate, there is a process for Monitor to modify the methodology. The Competition Commission has the final right to make changes if it does not approve Monitor’s modifications.
Local modifications to national tariff may only be made when it would be uneconomic for the provider to provide the service for the NHS at tariff rates. The modifications must still be made in accordance with the methodology set by Monitor and may either be agreed locally and approved by Monitor, or in default of local agreement, determined by Monitor on application by the provider.
There are two separate regimes which apply in the event of insolvency of providers of NHS services; trust special administration for NHS Foundation Trusts and health special administration for companies providing health services, but only for companies where their licences impose certain conditions on them relating to the continuity of services. Companies which do not have any of those conditions are outside the health special administration rules and, in the event of insolvency, are subject to the general law.
The insolvency arrangements raise complex issues on their interrelationship with EU prohibitions on State Aid which are beyond the scope of this paper. If you would like to discuss this further please contact us.
In the event Monitor is satisfied that a FT is or is likely to be unable to pay its debts, it can appoint a trust special administrator to exercise the functions of the governors, chairman and directors of the FT. The objective of the administrator is to secure the continued provisions of relevant services for the purposes of the NHS until it becomes unnecessary for the Trust special administration to remain in place. The relevant services are those services which the commissioners are satisfied that, if there are no alternative arrangements, their cessation would be likely to have a significant adverse impact on the health of services users or significantly increase health inequalities or fail to prevent this happening.
The administrator must make proposals to Monitor for the FT to come out of administration or to be dissolved to Monitor. The legislation sets out the process for the administrator to develop a final report to be approved by Monitor and on which the Secretary of State has a final veto. The process may also involve the Secretary of State invoking procedures for significant failure by the NCB, CCGs or Monitor to discharge their functions if relevant.
Where the final decision is to dissolve the FT then Monitor will dissolve the Trust and make an order to transfer the property and liabilities to another FT or the Secretary of State. The order can also provide for the transfer of staff.
In relation to companies where health special administration applies, Monitor can apply to the court for the appointment of a health special administrator. The administrator must be a qualified insolvency practitioner. The objective of the administrator is to secure the continued provision of the healthcare services, provided by the company, as determined by the commissioners of the services. This is in accordance with certain criteria to be set out in regulations. It remains to be seen whether how these will differ from the criteria for services to be “secured” in trust special administration.
The health special administrator will achieve this objective by either rescuing the company as a going concern, or by transferring all or part of the company operations to another provider. The administrator must protect the interests of creditors (and subsequently members) only in so far as consistent with the above objective. Regulations are to be issued with more details of how health special administration will work including on the application of the Insolvency Act 1986 and requirements for Monitor to indemnify the administrator.
Monitor has a duty to establish mechanisms for providing financial assistance for the purposes of health special administrations and trust special administrations. This includes the giving of indemnities to administrators. This also includes establishing a fund by raising money through levies on providers to ensure providers arrange or are provided with insurance. For the protection of providers, there are detailed rules on how any levy may be set (including consultation and arrangements for referral to the Competition Commission in the event of sufficient levels of objection). The Secretary of State can cap the amount of the levy.
In addition, the Secretary of State may introduce regulations which give Monitor the power to make charges to commissioners for Monitor’s functions in relation to securing the continuity of NHS services. Once again the Secretary of State can cap these charges.
We can provide training on the new regulatory framework and advise you on the implications of the new regulatory regime on your organisation
We can also advise you on the implications of competition and procurement law and provide guidance in the carrying out of your activities (whether commissioning or provision). We advise providers on their options if they have concerns that they may be prejudiced by breaches of competition and procurement law or guidance and commissioners and other procuring bodies facing challenges.
We will be closely monitoring the development of the pricing regime and can advise you of your legal remedies in the event that you have concerns. We also can advise you in relation to the implications of the insolvency regime including the position of funders and suppliers when dealing with the providers of NHS services.
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 new licensing and insolvency arrangements 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.