15 July 2005
Most of the NHS foundation hospitals have begun to use their new powers to borrow and invest, and are financially sound. But government policy on the next steps in their development needs to be clearer
The worst fears about NHS foundation trusts have not materialised. Some people expected the new organisations to poach the best staff, avoid treating patients with complex conditions and make unnecessary admissions.
However, the Healthcare Commission's review of the initial 20 trusts in their first year of operation reveals subtler, but nonetheless important, shifts in the way health services operate.
It shows that the new institutions have successfully overcome many of the early hurdles. But questions remain about the direction of policy on foundation trusts, and whether they will deliver what people want: better care.
The trusts have begun to use new powers to borrow, invest and accelerate investment in services. This has begun to translate into new wards, theatres and equipment, with less of the bureaucratic wrangling of the past.
A good example is the decision to add extra wards and theatres to the University Hospital Birmingham. This took less than three months, compared with what could have been two-and-a-half years under the old centralised system.
Foundation trusts are subject to government control but have to be more accountable to the communities that they serve.
The first 20 trusts have on average recruited 5,000 members. These are representatives of the local population who elect the lay governors. The governors are consulted on decisions about services and board appointments for their hospitals.
The idea is to shift power from central government to local people. This is absolutely critical if we are to have a 'patient-led NHS'.
Of course, the ultimate test will be whether the trusts are delivering better services. In the review period we found no evidence to show foundation trusts pulling ahead and creating a two-tier NHS.
In future, there is reason to think that they might deliver improvements more rapidly, given their faster decision-making and potential for greater investment. But it is likely to take a couple of years before those kinds of changes start to feed through.
Our review found that most trusts have so far handled finances well, although improvement is needed as four of them have deficits of more than £3m.
But most trusts said the number of government policies being introduced simultaneously put them under financial pressure. There are extensive financial changes taking place, such as payment by results and more use of independent sector treatment centres.
The government needs to ensure clarity in its policies if these newly financially independent institutions are to achieve their potential.
One reason for giving foundation trusts greater financial independence was to encourage innovation. We know from the private sector that to encourage innovation, organisations need to plan ahead.
The government needs to give clearer signals about the direction of policy so foundation trusts can plan for the impact on income and expenditure. It also needs to minimise instability caused by other changes in financial arrangements.
Our review found that foundation trusts were crying out for even greater financial freedoms.
The trusts want to raise income from private patients beyond the current cap. They want to be able to bid for contracts awarded to independent treatment centres. And they want freedom to expand or contract services.
It is crucial that the government lays down what competitive behaviour is acceptable. Keeping foundation trusts out of all these areas is not the right answer in the long run.
We need early decisions on whether trusts will be allowed to take over other trusts or expand into primary services — and, if so, on what conditions. People will rightly want to know how these decisions will be taken in the public interest, without undermining the NHS as a whole.
The new institutions are likely to have a profound impact on the way that local health communities operate. Generally speaking, the trusts have continued to have good relationships with these communities. But where relations were already poor, it is clear that foundation trust status can aggravate the situation.
There is also a need to be clear about who is responsible for what. As foundation trusts are not responsible to strategic health authorities, who should co-ordinate local healthcare activity? As foundation trusts have members to represent the public, what should happen to the existing patient and public involvement forums?
All these issues need to be addressed if foundation trusts are to realise their potential and have the right incentives in place to drive up the quality of care, as well as deliver efficiency.
Anna Walker is chief executive of the Healthcare Commission