01 April 2004
The objections have been heard, the legislation passed, the votes counted and boards of governors installed. But, as the first NHS foundation trusts settle into their new status this week, they will be aware that their futures are not as clear cut as they would have liked.
Thirteen of the first 25 candidate trusts – those with the most complex organisations, such as large teaching trusts – are still waiting to hear the results of their assessment by the independent regulator. These will be announced before the beginning of July.
Even those handed a licence to operate by the regulator this week know that there are still issues to be resolved. The regulator, Bill Moyes, has let it be known that the candidates have to sort out some issues on short-term financing and their corporate governance. However, he is most concerned with the trusts' long-term financial stability.
Much has been made of foundation trusts' freedom from Whitehall control, particularly their ability to borrow from commercial lenders, but one of the consequences of this is that there will be no safety net if they get into financial difficulties. Foundations maintain they will run 'tight ships' as a result of this injection of commercial discipline into the NHS. But Moyes is more circumspect and wants to ensure that trusts have strategies to deal with all eventualities, such as variations in income, changes in NHS priorities and future cost pressures.
One candidate finance director, who asked not to be named, says the regulator is right to be cautious. 'Foundation trusts are completely new entities and Bill Moyes is trying to ensure they are on a firm footing from day one. There will always be teething problems but the trick is to keep the faith and know we will sort it out,' he adds.
There have been questions over the new, long-term and (for the first time in the NHS) legally binding contracts between foundations and their commissioners – usually primary care trusts. Some PCTs complained they were being 'forced' into signing the deals without knowing the full details.
However, the agreements are being made and most contracts are on the verge of being signed. Bradford Hospitals Trust, for example, says it expected negotiations to be completed 'this week'.
Jane Tomkinson, finance director of Countess of Chester Hospital Trust, says that it has agreed 98% of the clauses in its legally binding contract with its commissioners. 'It has been quite an iterative process and there are still a couple of areas to be decided, but there is nothing to suggest we won't be able to bottom these out,' she says.
The most important elements are the attached schedules that deal with the year to year delivery of health care, Tomkinson adds.
It is understood that the regulator's chief concerns are that foundations will not be able to meet their cost improvement targets and maintain their financial liquidity with the removal of the safety net of short-term loans from the Department of Health. Public Finance understands the regulator is aiming to establish a short-term fund that will provide overdrafts to foundation trusts up to 2006. After that, they will be expected to have arranged their own overdraft facilities through commercial lenders.
Other questions remain unanswered. The foundation candidates have yet to see the proposed prudential borrowing code, for example. The ability to borrow money for new buildings and equipment is one of the key attractions of foundation status. Many of the first wave's capital schemes have remained on the drawing board because neighbouring trusts have been judged to have greater need when capital funds have been shared out in the past.
The Countess of Chester is one example – the hospital was built in 1978 to accommodate 300 beds. It now has more than 600 and wants to borrow early in its foundation life in order to provide the facilities to meet this workload.
The Royal Marsden Trust says it needs the extra capital to invest in new technology, such as more sophisticated diagnostic and screening techniques. Despite the unanswered questions, the feeling among foundations is that they must 'have faith'. As Tomkinson puts it: 'We know the regulator is not going to implement anything that is going to screw things up.'
PFapr2004
