Liberating the NHS regulating healthcare providers consultation on proposals

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1 Liberating the NHS regulating healthcare providers consultation on proposals This document is the response from Association of British Healthcare Industries (ABHI) to the consultation above. ABHI has responded to the White Paper itself and aspects of our responses below are contained also in that higher level document. ABHI is the industry association for the UK medical technology sector. Our purpose is to promote the rapid adoption of medical technologies to ensure optimum patient outcomes throughout the UK and key global markets. Response to consultation questions Whilst the proposals for the regulation of providers commissioning offer many opportunities, there are also threats and risks. ABHI s comments are intended to focus on the former, whilst taking into account the latter. Freeing providers Q3. Do you agree that foundation trusts should be able to change their constitution without the consent of Monitor? Q4. What changes should be made to legislation to make it easier for foundation trusts to merge with or acquire another foundation trust or NHS trust? Should they also be able to demerge? Q5. What if any changes should be made to the NHS Act 2006 in relation to foundation trust governance? Q6. Is there a continuing role for regulation to determine the form of the taxpayer s investment in foundation trusts and to protect this investment? If so, who should perform this role in future? Q7. Do you have any additional comments or proposals in relation to increasing foundation trust freedoms? ABHI supports the broad principles underpinning the intent to free providers from top-down control and the core vehicle to enable this the expansion of the foundation trust (FT) model. In striving for this approach there a number of risks which we believe need to be considered in order to ensure the aims of this reform improving outcomes, being more responsive to patients, and encouraging innovation are not diminished. Page 1 of 7

2 Risks: 3 years may not be a sufficient time frame for existing NHS trusts to attain the necessary improvements/standards required to attain foundation trust status, given the history of the development of FTs. It may be the case that the hardest are last. There may be considerable difficulty during a period of transition. How will NHS trusts access necessary investment (over and above current allocations) in order to make the changes required to attain foundation trust status? What happens to NHS trusts that do not meet the grade to become a foundation trust and what threats to services for patients flow from uncertainties in status? Regulation of FTs becomes excessively light touch as the role of Monitor expands and changes Finally, not all FTs have been successful. Notable high profile failures include Mid Staffordshire NHS Foundation Trust & Basildon and Thurrock University Hospitals NHS Foundation Trust. Possible approaches to mitigate: The findings of the independent inquiry into care provided by Mid Staffordshire Foundation Trust made recommendations in four areas: 1. Involving patients and the public 2. Commissioning for outcomes supported by excellent use of appropriate data and information 3. Ensuring governance and clarity of accountability of all the different organisations in the system, and 4. Clinical leadership The recommendations would suggest that adequate time should be expended in understanding the necessary changes in infrastructure, governance systems, organisation culture, and performance measurement in the transition to independence as an FT. The process should not be rushed and may require additional levels of resource financial and human in order to execute, given that the FT movement has arguably already had its early wins. With greater freedom and less state control comes greater responsibility to ensure that quality of care does not suffer. We urge that the findings of the recently announced public inquiry into the role of the commissioning, supervisory and regulatory bodies in the monitoring of Mid Staffordshire Foundation NHS Trust be reflected upon, and recommendations adopted. Additionally, a fallback system needs to be established which outlines any remediation steps in the situation where NHS Trusts do not reach the required standards in striving for FT status. The role of Monitor as an economic regulator is modelled on those already in existence, e.g. the utilities sector. These organisations essentially regulate private sector organisations to ensure competition, price regulation and consumer protection. The dynamic between Monitor and FTs will be different given that the latter are entirely publicly funded organisations. With Monitor s remit growing, it is essential that it still retains its current oversight functions of FTs. A move to, say, an Page 2 of 7

3 excessively light touch system of FT regulation may not be desirable and appropriate given the public s interest from the perspective as an investor and consumer and the experiences of such a regulatory system in other sectors, e.g. banking. Page 3 of 7

4 The role of Monitor economic regulation and licensing Q8. Should there be exemptions to the requirement for providers of NHS services to be subject to the new licensing regime operated by Monitor, as economic regulator? If so, what circumstances or criteria would justify such exemptions? Q9. Do you agree with the proposals set out in this document for Monitor s licensing role? Q10. Under what circumstances should providers have the right to appeal against proposed licence modifications? The ABHI understands the rationale for Monitor to be developed into an economic regulator and licensor of providers of NHS healthcare services. The new joint licensing system with the Care Quality Commission (CQC) has benefit and risk: ownership and accountability duplicity of functions and hence cost unclear order of precedence practicality ABHI supports the need for a streamlined and integrated registration and licensing regime though this process requires greater clarity in its practical day-to-day operation. For instance, what will be the order of precedence, will CQC registration override Monitor s authority? Monitor s licensing responsibility extends to ensuring observance of UK and EC competition law and procurement rules. In our experience, providers are well versed in applying these statutory arrangements in their operations. We suggest that similar rules and oversight should also apply to GP commissioning consortia. This is to ensure that all providers are able to freely tender to supply commissioned care services. Licensing safeguards should ensure that where communities rely on one, or very few providers, that mergers and acquisitions do not detrimentally affect patient access, lack of choice and quality. This can be achieved through a review system not wholly different from that provided by the Office of Fair Trading and/or the Competition Commission in respect of mergers and acquisitions that occur in the private sector. Page 4 of 7

5 Monitor Price regulation and setting Q12 Q13 Q14 How should Monitor have regard to overall affordability constraints in regulating prices for NHS service? Under what circumstances and on what grounds should the NHS Commissioning Board or providers be able to appeal regarding Monitor s pricing methodology? How should Monitor and the Commissioning Board work together in developing the tariff? How can constructive behaviours be promoted? The ABHI recognises the value of the current tariff system - Payment by Results (PbR) - and has actively engaged with the Department of Health to support its development. We welcome the expansion of the tariff system provided it incentivises the broad principles alluded to in the White Paper, e.g. reducing the need for hospital-based interventions. A number of issues need to be addressed: The range of services that will be subject to tariff, and those that are out of scope, The breadth of care settings that tariff will apply to, The flexibility within the tariff to allow for new and innovative medical technologies to be adopted, The mechanism by which the tariff will be modified and the situations this will apply to, The process by which information is gathered to provide granularity in setting the tariff at the right level, The White Paper mentions a number of concepts of tariff: most efficient, maximum, best practice, year of care etc. These terms need to be clearly defined. There needs to be greater clarity as to the basis by which tariffs will be calculated. That mechanism then needs to be applied in a consistent and systematic fashion across all areas of service that tariffs will apply to. There is considerable risk in setting the tariff level by, say, working to a cost-plus system that uses as a reference the costs incurred by the most efficient provider in the market. Potentially, this tariff then becomes the benchmark: the maximum tariff. ABHI strongly suggests that, tariffs are constructed through a robust bottom-up process of analysis that identifies all relevant elements that contribute to the delivery of a high quality, outcome focused patient care service. This has implications for gathering of reference costs, in which all hospitals currently participate. ABHI strongly recommends that an accreditation approach is adopted, emulating systems in use elsewhere, eg Germany, whereby some key standards are met to ensure that data feeding into the national reference cost system is sound. Recently the Classifications Review commissioned by the Page 5 of 7

6 Payment by results Team at the Department of Health 1 recommended that a move towards more detailed costing at the patient level should be continued, in order to provide better cost estimates that can (i) support the design and evaluation of classifications, and (ii) lead to improvements in the construction of HRG tariffs. The review mentions the German process whereby costing information is obtained from a sample of hospitals can provide timely updates to the schedule of casemix costs. This is especially pertinent in the case of pathway and community tariffs. The boundaries of where these tariffs apply are not as clear-cut as those that apply in an acute setting. In the case of patient care delivered in the community setting, the data points are not as well established which may mean that a tariff needs greater flexibility. The setting of maximum prices implies that commissioners may negotiate with providers to deliver these services at a discount. The questions arises as to whether this is an affordable tariff level and whether the reduction in tariff will cover the increase in transaction costs. For a new entrant, perhaps with lower fixed costs than the incumbent, it may be feasible allowing it to contract for, say, less complex procedures at that reduced tariff level. The incumbent is therefore left with the more difficult, but none the less essential services, and a significantly reduced level of income to cover its fixed costs. This places an undue financial burden on the incumbent to manage and heightens risk to overall service continuity in localities. Additionally, from an industry viewpoint, the tariff also represents a barrier to innovation adoption. For instance, a new technology may cost more than the incumbent used in a specific procedure but has the potential to deliver savings further down the care pathway. We recommend that tariffs continue to develop this flexibility perhaps through a centrally administered process. The working relationship between Monitor and the NHS Commissioning Board needs to be based on trust, respect, and open communication within a leadership framework that clearly demarcates responsibility and accountability between the two organisations. Leadership is critical in embedding a productive relationship where both teams are aligned on strategy and objectives. The ABHI highly recommends a governance structure that assigns a senior leader to oversee interaction between the two bodies or, preferably, management of tariff through a single national tariff office. Here again, Germany offers an interesting comparison as the same body (InEK, Institute for reimbursement in hospitals) oversees both the tariff structure and the relative weights for all DRGs (leading then to the tariff-setting). We believe it is critical for a single body to be responsible for Payment by Results structure (HRGs), collection of costs, and tariff-setting as it will allow a much better coordination and moreover a better flexibility for improvement. Some medical technologies can allow for a cheaper alternative of providing care (for example moving from major surgery to less invasive interventional procedures, or from hospital setting to outpatient), however there is no mechanism for such suggestions to be implemented in the system. Again to illustrate with Germany, there is an opportunity every year to 1 Page 6 of 7

7 submit suggestions for change not only on the tariff itself, but on the HRG structure. This would be a valuable addition to the Payment by Results mechanisms. A number of stakeholders have an interest in how the tariff is developed, not least the medical device technology industry, the ABHI is keen to stress that its views should as now continue to be taken into consideration through a formalised programme of engagement and interaction. Monitor - promoting competition In the new NHS, patient choice will be a key determinant of which provider is favoured over another, and underpins competition. The ABHI presumes that providers will differentiate their service offerings based on quality, innovation and productivity. The ABHI supports this principle as medical technology, through innovation, has the potential to contribute to improved quality (through better outcomes for patients) and improved productivity (generating more output for the same or reduced inputs). The role of local price variations - currently managed through the Market Forces Factor will need to be considered and ABHI makes suggestions on this point in its high level response to the White Paper as a whole, already submitted. ABHI October 2010 Association of British Healthcare Industries (ABHI) 111 Westminster Bridge Road, LONDON SE1 7HR Tel: A company limited by guarantee. Registered in England no Registered office as above Page 7 of 7

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