Soul searching NHS leaves foundation trusts with an identity crisis

As part of our work on analysing the controversial decision to prohibit the proposed merger of Poole Hospital Foundation Trust and the Royal Bournemouth and Christchurch Hospitals Foundation Trust, we’ve been grappling with what the role of foundation trusts really is in an ever changing system.

Last year, following the decision made by the then Competition Commission to prohibit the proposed merger, press reports were strongly associated with headlines around competition. For example, Polly Toynbee wrote in The Guardian: “Competition is killing the NHS, for no good reason but ideology.

“Enforced competition, as predicted, is wasting millions and putting lives at risk. Just look at Bournemouth and Poole.”

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Competition conundrum

While competition and its role was important in the final decision to block the merger, one of the issues that struck me the most was the inconsistency in how the system views NHS foundation trusts. In many ways, the role of competition in the NHS is of secondary importance to working out what NHS foundation trusts are actually there to do.

On the one hand, we expect foundation trusts to operate in a quasi-market environment, competing for patients and referrals, and achieving financial balance.

On the other, we expect them to act for the greater good, often against their own financial self-interest (such as working with other stakeholders to shift care into the community).

The Equity and Excellence: Liberating the NHS white paper suggested that providers should be given freedom, and that the system of controlling foundation trusts would no longer be based on national and regional performance management.

Yet we know that the Department of Health has been closely monitoring accident and emergency waiting times and, like all NHS trusts, those with foundation status can expect personal calls from the secretary of state if performance slips.

‘Should trusts be protected as public institutions with a broader social purpose?’

Unlike independent sector bodies, NHS trusts and foundation trusts may receive subsidies to prevent failure and are subject to a high degree of scrutiny, both from regulators and from within the Department of Health.

However, strictly speaking, if a foundation trust is to be considered an enterprise, unless specific conditions are fulfilled, subsidies may fall foul of European legislation that prohibits state aid because of its distortive effects on competition.

Muddied waters

At the heart of this issue is whether healthcare services are intrinsically “special”.

Healthcare market failures have been well researched by American economist and political writer Kenneth Arrow, whose work from 1963 has been particularly cited. He highlighted the fact that healthcare professionals are expected to put patient interests above their own self-interest, suggesting “it is clear from everyday observation that the behaviour expected of sellers of medical care is different from that of business men in general”.

While the administration of healthcare has moved on a bit from the 1960s, the quote is still as relevant today.

However, the division between business and healthcare has become muddier – particularly for NHS foundation trusts. Should they be treated as independent businesses for the purposes of system management, or should they be protected as public institutions with a broader social purpose?

‘Are foundation trusts part of an NHS chain or should we view them as individual enterprises?’

At the moment NHS foundation trusts appear to be somewhere in the middle. Sometimes this works in their favour, but at other times (such as the decision to block the merger at Bournemouth and Poole) it may not. This middle ground makes life a bit more complicated.

Interestingly though, when the white paper, A National Health Service, was published in March 1944, the government did not originally intend to nationalise the voluntary hospitals – including hospitals such as Guy’s in London and the Bristol Royal Infirmary, which are both now part of foundation trusts – that had developed with very different cultures and ways of operating compared with the municipal hospitals run by local government.

Breaking boundaries

Given the focus in the NHS Five Year Forward View on dissolving traditional sector boundaries and on managing systems rather than organisations, more thought should be given to what role NHS foundation trusts should have in the future. Are they part of an NHS chain or should we view them as individual enterprises?

The issues above are not just academic – they are fundamental questions at the heart of how the NHS should be managed and regulated in practice.

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Emma Spencelayh is senior policy adviser for the Health Foundation