National Health Service (Approval of Licensing Criteria) Order 2013

Tuesday 12th November 2013 Grand Committee

Considered in Grand Committee

12:38

Moved by

[Earl Howe]

That the Grand Committee do report to the House that it has considered the National Health Service (Approval of Licensing Criteria) Order 2013.

Relevant document: 11th Report from the Joint Committee on Statutory Instruments.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, the Health and Social Care Act 2012 requires that all providers of NHS healthcare services that are not exempt must hold a licence from Monitor. This is in addition to the existing requirement to register with the Care Quality Commission under the Health and Social Care Act 2008. Existing foundation trusts were licensed on 1 April 2013, and NHS trusts acquiring foundation trust status will be granted a licence on acquiring that status. Independent sector providers will be licensed from 1 April 2014, subject to the agreement of Parliament to this draft order.

The 2012 Act also establishes Monitor as the sector regulator of providers of NHS-funded healthcare services. In this role Monitor will grant licences and will regulate providers under the conditions of the licence. This builds on Monitor’s previous role as the regulator of foundation trusts. The provider licence is a key tool that Monitor will use in carrying out its functions of regulating providers to protect patients’ interests.

As is right in establishing a new regulatory framework, the Act requires the approval of the Secretary of State to some key aspects of the new licensing regime in order to provide a check on their appropriateness. Monitor sets the criteria that providers which are not exempt must meet to be granted a licence by Monitor. Monitor’s power to set those criteria is, however, subject to the approval of the Secretary of State for Health. In the case of the first set of criteria, it is also subject to the affirmative parliamentary procedure—hence the draft order which is the subject of today’s debate. The criteria proposed by Monitor, and which have been agreed by the Secretary of State for Health, are set out in the schedule to the draft order.

Monitor has already set the licence conditions, a set of ongoing obligations, with which providers must comply once licensed. Monitor published its first set of standard licence conditions in February this year after approval by the Secretary of State for Health as required by the Act.

As the Committee will remember, not all providers of NHS services are required to hold a licence. The Secretary of State has set the exemptions from this requirement and these were considered by this House on 25 July 2013.

This order is concerned with the licensing criteria. These criteria set the requirements which providers of NHS healthcare services must meet in order to be granted a licence. The licensing process is the entry point into the regulatory regime and provides Monitor with the tool to regulate providers. The licence conditions, the exemptions and the licensing criteria will give Monitor the tools to operate a regulatory framework on a large but defined pool of providers. It will enable Monitor to fulfil its main duty to protect and promote the interests of people who use healthcare services by promoting healthcare provision which is economic, efficient and effective and maintains or improves the quality of services.

In this context, Monitor has taken a proportionate and balanced approach to proposing the licence criteria and setting the licence conditions. Monitor undertook extensive engagement and consultation on its approach in order to arrive at a framework which protects patients’ interests by ensuring that providers are subject to proportionate regulation.

Monitor has proposed two criteria, which correspond broadly to two of the ongoing standard licence conditions. The first criterion requires providers to be registered with the Care Quality Commission, if required by law, in order to provide NHS services, and acts as an objective measure to assess compliance with standards of quality and safety. In order to meet this criterion, applicants for a licence must be registered with the Care Quality Commission, if required by law to do so, when the licence is granted.

The second criterion focuses on providers’ fitness. The purpose of this criterion is to ensure that people involved in overseeing the organisation and influencing the provision of healthcare services meet certain fitness requirements. In particular, no person who is a director or governor of a provider, or is performing an equivalent or similar function, may fall within the specified description of an unfit person. The description of an unfit person is designed to ensure that individuals performing these functions must comply with the statutory fitness requirements which are equivalent to those set out for directors and governors of NHS foundation trusts, and certain requirements on directors of companies. Examples of these requirements are that an individual must not be an undischarged bankrupt; have undischarged arrangements with creditors; be subject to a moratorium period under a debt relief order; have received a prison sentence of three months or longer during the previous five years; or be subject to a disqualification order or undertaking.

The criterion also requires that any corporate body which holds the position of director or governor of a provider must not be subject to the insolvency proceedings or arrangements listed in the order. Such proceedings might indicate that the company is not effective in governing the applicant and managing the applicant’s financial affairs. Providers must be able to meet these criteria in order to be granted a licence, but they must also continue to meet them to keep their licence, along with other licence conditions designed by Monitor to protect and promote patients’ interests. The department agrees that these are robust, appropriate criteria for Monitor to assess providers against, and I therefore commend this order to the Committee.

12:45

[Lord Hunt of Kings Heath (Lab)]

My Lords, first, I thank the noble Earl for that very full explanation of this order. In the context of the order, I should declare my chairmanship of an NHS foundation trust, which is subject both to Monitor and the Care Quality Commission.

I thought that the noble Earl’s full explanation of the order really reinforced concerns about the complexity of Monitor’s role and potentially the conflict between its licensing responsibilities, its independent regulation of pricing of NHS services and the general support that it gives for NHS foundation trusts. Now that Monitor has had time to consider these matters, since the passage of the 2012 Act, can he explain how it avoids conflicts of interest between these three separate roles? He will be aware that we discussed that issue when we debated the Bill.

Clearly, a lot of responsibility in Monitor rests on the leadership of Dr David Bennett. The noble Earl will be aware that in the pre-scrutiny hearing in the other place, the Health Select Committee—after examining Dominic Dodd, who had been proposed as chairman of Monitor—said of David Bennett that he,

“was appointed as interim Chief Executive in April 2010, and appointed as substantive Chair in March 2011. Since then he has filled the roles of both Chair and Chief Executive—effectively Executive Chair—and has led Monitor through the whole process of change brought about by the Health and Social Care Act 2012. This has been a period of great uncertainty for Monitor, with the nature of its role in the new system being unclear for most of the 18 months between the introduction of the Bill in January 2011 and its passing in 2012. Dr Bennett has both shaped and interpreted the role that Monitor now plays in the system which makes the transition to another individual taking on the Chair an especially difficult one. We do not think Mr Dodd is the right person to undertake that difficult transition”.

I understand that, following that, Mr Dodd withdrew his nomination, or at least his nomination was withdrawn.

In the context of this order, which sets the framework in which licensing will be undertaken by Monitor in future, can the Minister say a little more about the Government’s intention with regard to leadership, particularly the continuing role of Dr Bennett as both chairman and chief executive? As the Minister will know, in normal corporate governance terms that is not normally encouraged.

My third question relates to the Explanatory Memorandum, rather than the order itself. I was interested to see that, under “Policy Background”, paragraph 7.2 sets out three key functions of Monitor. I have already referred to them as,

“working with NHS England to provide independent regulation of pricing … protecting patient choice and”,

addressing,

“anti-competitive behaviour … and … working with commissioners to secure continuity of services”.

I just wondered where integration had got to. Have the Minister’s officials forgotten that? We debated this at great length and the Bill was amended to ensure the importance of integration. The noble Earl will recall that Monitor was given that express role. I am very disappointed to see that it is not referenced in the policy background but I am not surprised because, frankly, we have seen very little work on integration coming out of the various bodies concerned with the health service.

There has, however, been an awful lot to do with competition. As the noble Earl will know, in evidence to the Health Select Committee—I think it was only two weeks ago—the chief executive of the NHS railed against the way in which competition was being introduced in the health service. He knows, as everyone working in the health service knows, that a huge amount of money is being spent because of the enforced tendering of services that is undoubtedly taking place. It is very important that the Government reconsider the architecture that they have now put in place.

In addition to Monitor, we have the CQC, the NHS Trust Development Authority, the NHS Executive—I am sorry, I meant NHS England; that was a Freudian slip—and Ministers. Compared to the previous Secretary of State, the current Secretary of State takes a very different view of his role, and so we have a very confusing architecture. We also have the Office of Fair Trading making extremely unhelpful and unwelcome interventions, which again seems to act against the appropriate integration of services. It really needs to be sorted out.

I have no doubt that we will talk about this in a few minutes, but after Monitor’s welcome report on walk-in centres—I do not know whether it was as welcome to the noble Earl as it was to me—we have a situation where NHS England has undoubtedly been encouraging clinical commissioning groups to close down walk-in centres to make savings. However, yet another part of the architecture has come out with a report essentially saying that this has been a big mistake and has added to the pressure on A&E departments. One is entitled to ask: who on earth is really driving the policy at the moment?

Although I welcome the Monitor report, I was interested to know why it has produced it. At paragraph 1.2 on page 9 of the report, Monitor says:

“Our decision to review walk-in centre provision is grounded in our main duty as health care sector regulator: to protect and promote the interests of patients by promoting the provision of health care services that is effective, efficient and economic and that maintains and improves the quality of services”.

Well, yes, but is Monitor’s role really to look at this area of service provision? Fine—it is a good and welcome report, but it is confusing as to where one regulator’s role stops and the other starts. I have this great impression of five or six large, powerful bodies, all with well paid executives and strong boards, vying for influence. What that does at a time of huge pressure in the health service is to create uncertainty about who is leading, who is setting the policy and who is responsible for its implementation.

Finally, I come back to the question raised by Don Berwick in his very interesting report on patient safety, which the Government commissioned. In that report, which was published only a few months ago, he said:

“The current NHS regulatory system is bewildering in its complexity and prone to both overlaps of remit and gaps between different agencies. It should be simplified”.

It certainly should be simplified. He went on to say:

“The regulatory complexity that Robert Francis identified as contributing to the problems at Mid Staffordshire is severe and endures, and the Government should end that complexity”.

Does the noble Earl agree that the order he brings before us today is simply a sign of greater complexity? I do not think that we have had a response from the Government on this recommendation. I know that the noble Earl has a regulatory Bill up his sleeve for the next Session. Given what Don Berwick said and the evidence that Sir David Nicholson gave to the Health Select Committee, does he not agree that it might be sensible to go wider and look at this whole business again, to get much greater clarity into what is a complex situation?

[Earl Howe]

My Lords, I am grateful to the noble Lord, Lord Hunt, for his questions. I start with the issue that he raised initially, which was about the role of Monitor and what he perceives as the conflicts within that role. I address that by saying that there is no fundamental conflict, although he is perfectly right to say that Monitor has distinct, separate functions. Different executives within Monitor lead on each of those areas. Monitor has a board, which functions to ensure that David Bennett’s dual role as chair and CEO works effectively. At the same time, the Department of Health, as the steward of the system, keeps Monitor’s performance under review. It does that through quarterly accountability meetings. I suggest that the conflicts that the noble Lord perceives are much more in the perception than the reality. There are mechanisms in place within Monitor to ensure that the functions are kept distinct and that, where appropriate, Chinese walls operate.

The noble Lord referred to the nomination of Dominic Dodd as the chair of Monitor and the Select Committee’s view that he was not the right person to lead the organisation. That was a view which Mr Dodd himself accepted, and he volunteered to step aside. In the light of that, we are currently considering options for a sustainable solution to Monitor’s leadership. We will make an announcement as soon as we can on that, but, meanwhile, I emphasise that we have complete confidence in David Bennett’s leadership of the organisation.

[Lord Hunt of Kings Heath]

I meant no criticism of Dr Bennett in his role. I just point out that if one goes back to Cadbury and all sorts of reports since then, the evidence is clear that it is undesirable to have the same person carrying out both roles.

[Earl Howe]

I completely take the noble Lord’s point. We will of course be looking carefully at how best to proceed. It was, of course, with a view to appointing a separate chair that Mr Dodd’s name was put forward.

The noble Lord referred to the importance of integration. He is of course right that we debated the issue extensively during the passage of the Health and Social Care Act and have done so since. The Health and Social Care Act established Monitor as the sector regulator of healthcare. That involves a duty placed on Monitor to protect and promote patients’ interests by promoting provision of NHS services which is economic, efficient and effective and which maintains or improves the quality of those services. Within those broad headings, integration fits neatly.

The provider licence is a key tool which Monitor will use in carrying out its duties and in influencing and regulating the provision of NHS services. Specifically, the licence enables Monitor not only to set prices for NHS-funded care, which it does in partnership with NHS England, but to enable integrated care. The fact that that is not explicitly referenced in the Explanatory Memorandum is not something to which noble Lords should attach particular significance. Integration is part and parcel of Monitor’s overall duties.

13:00

Those duties also encompass safeguarding choice and preventing anti-competitive behaviour, supporting commissioners to protect essential health services for patients if a provider gets into financial difficulties and overseeing the way that NHS foundation trusts are governed. The licence condition which is pertinent under this heading states that all licence holders,

“shall not do anything that could reasonably be regarded as detrimental to enabling integrated care”,

where that is in patients’ interests, so it is fairly and squarely included in those conditions.

The noble Lord referred to enforced tendering of services. I acknowledge that there is still a degree of misconception within the health service on this issue, despite the public statements made by Ministers. The position is that patients should receive healthcare services from providers from whichever sector—public, private or voluntary—is most capable of meeting their needs and improving the quality of services. Competition can be a valuable tool for commissioners in delivering greater choice and control to patients and can be an important way of bringing in fresh new thinking and new ideas about different ways of doing things. It is already well established in the NHS, including competitive tendering, and has shown that it can be used as a means of driving up quality—I think there is general consensus on that—but it remains for commissioners to decide how best to procure services in the interests of their patients, including where it might be appropriate to introduce competition and where it would not be appropriate. Commissioners take decisions on the best provider to deliver those services.

It has never been and is absolutely not the Government’s intention to make all NHS services subject to competitive tendering. The Section 75 regulations in place are intended to maintain the previous position on procurement, which was introduced before May 2010 and is set out in existing NHS guidance and UK procurement law. It is worth reminding noble Lords that acute elective care, which represents the vast majority of NHS services, is not secured through competitive tendering, and that will continue to be the case. A single tender action may well be justified on the basis that there is only one provider able to meet the clinical quality and safety standards required by a commissioner, and I say again that it is for the commissioner to decide what services it believes are appropriate for meeting the needs of patients in its catchment area. If a commissioner can properly satisfy itself, for example, that a certain case load volume or case mix needs to be maintained in order to provide a safe and effective service and there is only one provider capable of doing that, that would be a legitimate justification for awarding a contract without a competition. The noble Lord may like to know—I am sure he is aware of this already—that very shortly Monitor and NHS England will be issuing further guidance on this subject which I hope will dispel any remaining misapprehensions that persist among commissioners.

The noble Lord referred to walk-in centres. The problem with walk-in centres is that many of them, when looked at closely by clinical commissioning groups, fail to provide value for money. Many were and are performing a very useful service, but GPs have voiced concerns about a lack of demand for these services in parts of the country and have pointed out, as highlighted in Monitor’s report, that in some areas the centres duplicated existing GP services which effectively means that the NHS is paying twice for the same thing.

We know that the system needs to change. That is why Sir Bruce Keogh was tasked with looking across the piece at urgent and emergency care. His initial report on that system-wide review is due to be published tomorrow.

The noble Lord suggested that the criteria and the system that the Government have set up are overly complex, and that there is a regulatory complexity overarching the NHS. I do not see these particular regulations as overly complex. In fact, they are delightfully simple. There are only two criteria, and they are very straightforward: a provider has to be registered with the CQC and it must have a fit and proper person overseeing what it does. Monitor has chosen those tests as being proportionate; they draw on tests from other appropriate contexts and they can be objectively measured. Later this year Monitor will publish guidance to help providers understand the licence criteria and to assess whether Monitor will determine that they meet the criteria, and what information they will need to supply as part of the application. There will be a Monitor helpline, to which providers can submit questions and from which they can seek clarification where needed.

With regard to the system generally, we are in the early months of the new NHS architecture. It may seem complex. When looked at more closely, however, the various bodies that regulate and have oversight of the system are seen to perform distinct functions. It is not right that those functions are merged: each is important, and we cannot do without any of them. During the coming months it will be for Ministers and the department, as stewards of the system, to make sure that all those bodies are not only working to their statutory remits but are also working with each other for the benefit of patients.

Among the various bodies that the noble Lord, Lord Hunt, referred to, the CQC’s role is to safeguard the quality of services through rigorous inspection, and Monitor’s role is to use its powers to ensure that the problems found by the CQC are addressed as quickly as possible. I hope I have answered most of the noble Lord’s questions, though no doubt the issues he has raised will be the subject of many a future debate in this Room and in the Chamber.

Motion agreed.