Notes from a press session with Dr David Bennett, chief executive, Monitor

Q: What is your reaction to the suggestion in Sir David Nicholson’s HSJ interview of potentially bringing together purchasers and providers?

David Bennett: I only know what I read in HSJ of his comments. We already have some providers doing commissioning, where they subontract work to other providers.

Q: At some point, your role in authorising FTs dies away, leaving you as predominantly an economic regulator. Have you given thought to what Monitor’s role would be if we were to move to a more (or even all) HMO-type world such as that implied by the Nicholson HSJ interview?

DB: Not a lot of thought. That would be a long way down the road, but it’s fully reasonable as a possibility of where the system might end up. But it’ll be quite a while as that would be a long way away from where we are today.

Our work on setting prices would change if we more move to capitation and year-of-care type approaches. That would move all the detailed stuff into individual organisations. If we can get there, then price-settings gets simpler – good!

Then there are questions on patient choice, competition and co-operation. What would the proposed model actually look like? In the US, Kaiser Permanente is a very different system, in a health economy that’s not tax-funded or free at point of delivery.

So we don’t know exactly what a more integrated approach would look like in the English NHS, but we should be open-minded about whatever delivers quality care.

For the foreseeable future, Monitor will remain a non-typical economic regulator with ongoing responsibility for the performance of FTs: public providers are 95 percent of our health system. We have to ensure that FTs remain well-led and sustainable and that major role will still be with us for some considerable time.

Q: Do you see this provider-commissioner= integration as feasible, where there’s only one provider and one commissioner?

DB: We’ve already got some commissioners doing capitated budgets, and prime provider contracts: we can do that today. If there’s a more fundamental change to the nature of commissioning, that's about government policy, which is not in the power of arms’ length bodies like Monitor and NHS England.

Q: With regards to changes you’ll be making to the tariff, what are your plans?

DB: We don't start doing the tariff until 2014-15, and I’ve said I think that should look very like 2013-14. We need to improve our data on fundamental costs, which we know are not very robust. Our next step is to say ‘as a starting point with clean sheet of paper, how do we price different treatments or even different patients correctly?’

What we have now in tariff started from a very narrow purpose, and I could well imagine we'd want to move with NHS England towards certain types of year of care payment, and giving providers more freedom to work out exactly how to deliver care within that financial envelope.

I'm sure there’s still roles for the tariff system, HRGs as well as year of care - and newer pathway tariffs. Innovations would be likely to see national rules to follow, but prices set locally. We agree that we need to change the way care is delivered, so we can’t make a pricing system that isn't flexible to allow that.

How to run year of care budgets could be very complex. I’m conscious that must not make large and sudden changes, even if in ways the current system doesn’t work well at the moment (and our report last year showed that payment mechanisms aren’t working very well) but it does at least pay providers for the work they do.

We need time to collect cost data, work out how to do it better and payment reform will take years of careful transition.

Q: What is your view on the way previous tariff currency revaluations that took place after issues of The Quarter showed overspends, which then got providers back in the black?

DB: I sort of dispute that, but block contracts were being used to say ‘what revenue does a provider need? We can get so far towards it through PbR, and the block was the difference for negotiation’. Block contracts need clearer rules about how to price things not on tariff. Commissioners can use block contracts.

We’re also reviewing the A&E 30% marginal rate, and committed to greater transparency, so even if we maintain thirty percent marginal rate we’ll publish the results of our inquiry (which has just opened its call for evidence). We’re aware that providers feel there is little transparency in some parts of country over how the 70 per cent is spent.

Q: Back to the Nicholson interview, would you be happy if, for example, all the ‘non-cookie-cutter’ non-FT providers were all mutualised?

DB: There are two key things to becoming an FT: one is meeting a set of standards proving you’re delivering high-quality care in what should be sustainable basis. In my view, every NHS provider should be able to prove both.

The second thing is about governance and line management: there, may be legitimacy to other governance approaches. All providers need to meet the set national safety, quality and financial standards, but what organisational form they take is worth debating.

Q: Private providers simply have to be licensed.

DB: Yes, but if you’re not a public provider, the licensing requirement is fairly limited. Our applicant FT assessment is very comprehensive, and that level of challenge needs to stay even if the providers become social enterprises. If it’s the suggestion that those providers who are not able to meet our standards can simply live on in their current form forever more, that would be a bad idea.

Hospitals that can't meet these standards need to be fixed. It’s not acceptable that they can’t meet standards on a sustainable basis.

In practical terms, this is a job for The Trust Development Authority. And there’s case-by-case variation in those who can’t become FTs: it’s usually not about leadership but structural problems, be they real estate, or being in an over-provider-ed health economy. Some amount of reconfiguration is probably needed, as David Nicholson suggests. Even where there may be no structural problems, if there is not high-quality leadership, that’ll have to get better.

Trying to form chains of providers, as mentioned in the Nicholson article, is an interesting idea. I also think there’s just not enough high-quality leadership on the provider side to go around. If chains were a way of leveraging leadership across trusts by creating change, that sounds like good idea.

Q: How many non-FTs do you think are on the edge of failure?

DB: That’s a question for The Trust Development Authority.

Q: In the forward plans FTs send to Monitor, are a lot flagging as red as they’re struggling on governance on an ongoing basis?

DB: We review this week to week, and there are currently 19 on review. It’s crept up a bit but that’s about 14 percent of all FTs. It happens: leadships change.

Q: What about FTs who aren’t red-rated, but who are failing both A&E and 18 weeks?

DB: To be flagged by Monitor as being in breach of their licence, FTs have to have multiple breaches, or fail in three successive quarters. An FT can fail in one quarter and not be flagged by us, but we’ve looked at all 47 who missed target in Q4 last year. Some were in significant breach; for the rest, we asked them to tell us when they expect to get back to target and we’re having regular conversations with those FTs. At the moment, they’re all on target and heading back to fixing the problem.

Q: Are many FTs anticipating red flags on Q4 next year?

DB: Not many, but I am concerned. To what extent were the Q4 problems in the last financial year about factors like the coldest March ever? Some were one-off, but it’s not clear all were - and we’ll undoubtedly see some other one-offs cause problems next winter. There will be target misses, but we’re working with the Trust Development Authority and NHS England to see why so many missed.

We’re also getting involved in all three strands of the SOS’s newly-announced vulnerable older people strategy: we know that a source of a lot of A&E difficulties is frail elderly people presenting with large problems.

Q: Last year, six FTs were flagged for problems over size, and being just too small for viability. How many FTs are probably too small?

DB: Good question. I worry about those FTs who, though not hugely, are in deficit, so if there’s even a small deterioration, go more into deficit. As we look at FTs’ annual plans, I get a sense of risk that more will slip into deficit and financial difficulty.

The fundamental question is a scale issue which is not simple. What size is viable depends on local circumstances and leadership team quality. We need a better understanding of what is a minimum scale to operate effectively, to inform our decisions.

It’s not a simple £x million turnover. What usually matters has to be measured by department and by service – A&E or maternity services not large enough to be safe have obvious knock-on effects of the rest of a trust’s viability.