Monitor has some hard questions to answer about its future

In almost any other context, the decision to grant St George’s University Hospitals foundation status even as its finances were collapsing would have caused uproar.

The south London trust became an FT in February, on the basis that it would break even in 2014-15 and make a surplus in the current financial year. But by the time the trust’s board met later that month, it was already forecasting a £5.5m deficit, and things only got worse from there.

By the end of March it was £16.8m in the red. It is now planning for a deficit of up to £30m for 2015-16.

The situation reflects poorly on many involved, but is probably most damaging for Monitor, which was forced last week to open an investigation into St George’s finances just three month after granting it foundation status.

‘The situation at St George’s reflects poorly on many involved’

There have been past occasions where problems emerged at an FT soon after authorisation, although rarely quite so soon.

And typically these problems were clinical - as was the case for University Hospitals of Morecambe Bay FT - an area for which the Care Quality Commission has primary responsibility.

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Monitor’s strong suit

Financial performance and projections are supposed to be Monitor’s strong suit. It’s genuinely hard to believe that authorisation was granted, two months before the financial year end, on the assumption that St George’s would break even.

‘Questions about how exactly FT authorisation should work seem at best a little arcane’

If this sequence of events had occurred in 2011 or 2012, its effect would have been explosive, with questions asked at the highest level about whether the authorisation process was fit for purpose.

But this is 2015 and major financial holes are opening up all over the acute sector.

The idea that FTs represent an elite of the best run, most sustainable organisations has fallen by the wayside, with even Monitor chief executive David Bennett acknowledging that the performance of the worst FTs is “way down” among that of the non-FTs.

In this context, questions about how exactly FT authorisation should work seem at best a little arcane.

A new regime?

The broader question is how the current regulatory regime - built at a time when well run organisations could be expected to show surpluses and hit performance targets - can be reformed into something appropriate to the crises the NHS is now grappling with.

Maintaining separate regulatory regimes for FTs and non-FTs not only seem inconsistent in this context, it has left Monitor feeling pressure to grip performance problems in FTs in a way that goes beyond its remit as an arm’s length regulator.

Mr Bennett has admitted that Monitor was “to some extent” driven to establish its new provider sustainability directorate because it was weak on performance improvement when compared with the NHS Trust Development Authority.

‘Surely there’s a case for consistency in the treatment of troubled trusts and that of equally troubled FTs’

He has stressed that its new directorate will offer sources of support for struggling trusts, and will not be about direct performance management.

However, Monitor has also hinted that if the next government wants to hold Monitor responsible for FT performance problems, it will have to make sure the regulator has the powers to affect it.

Its business plan, published last week, notes coyly that there is a “mismatch” between Monitor’s current resources, powers and regulatory framework and “that for which we are de facto being held to account”.

There is little doubt provider regulation needs reform to meet the challenges of the next five years, and there is surely a case for consistency in the treatment of troubled trusts and that of equally troubled FTs.

But mistakes like the authorisation of St George’s will surely make the next government pause to consider whether the need for change should automatically mean granting further powers and resources to Monitor.

The onus will now be on the regulator to demonstrate to ministers that it is the right place for them to place their chips.