Feature

Rocking the foundations

The government’s proposals for foundation trusts will promote inequality and fragmentation in the NHS, and are a step on the road to a full-blown health care market, warns Dave Prentis

What are foundation trusts fundamentally about? They give the impression of being a hotchpotch of different elements, with one feature or another emphasised according to political circumstances. But their significance should not be underestimated.

The idea of foundation trusts (or foundation hospitals as they are often called) was first introduced by then health secretary Alan Milburn in January 2002, following visits to hospitals in Spain and other EU countries. The initiative was presented as a means of freeing high-performing NHS trusts from centralised bureaucratic control. Foundation hospitals, we were told, would have the ability to vary staff pay outside national rates and to raise funds through private sector borrowing.

Almost immediately the policy ran into opposition and qualifications were made. UNISON and other unions were concerned that foundation trusts would undermine Agenda for Change, the proposed new NHS pay structure. The government was forced to give assurances that foundation trusts would be covered by Agenda for Change. And following strong opposition from the Treasury, the Department of Health was obliged to agree that private borrowing by foundation trusts should count against DoH spending allocations, and that there should be limits imposed on the amount of private work that could be undertaken by foundation trusts.

The next development in their evolution was the announcement that they would reconnect hospitals with their local communities by making them more accountable and responsive. This new slant on the foundation trusts package was intended to make them more attractive to doubters in the Labour Party, allowing the government to present the policy as a return to the party’s co-operative roots.

Finally, in the face of continued concern from MPs and others that foundation trusts would lead to a two-tier health system, Mr Milburn announced his intention that all hospitals should become foundation trusts over the next four to five years. The government has not yet adequately explained how this expectation squares with its policy that the threshold for foundation status should be three-star status in its rating system.

So with the second reading of the bill introducing foundation hospitals now behind us, and the government apparently as intent as ever on steamrollering the policy through, why is UNISON continuing to campaign so hard against them? What is it that makes the issue of such fundamental importance?

The first reason is that despite all the positive changes that have been secured as a result of lobbying work by UNISON and others, the policy of foundation trusts remain fundamentally flawed. They will undermine the national nature of the health service by hiving off trusts as independent legal entities and giving them greater autonomy.

This will strengthen institutional boundaries and undermine the ability of the NHS to take a planned and co-ordinated approach to service development. For example, there are question marks over whether foundation hospitals will be obliged to sign up to national initiatives to improve systems across the NHS, such as shared financial services.

Foundation trusts will also increase inequalities between hospitals because they will have better access to capital finance. Despite the government’s assertion that it expects all hospitals to achieve foundation status within five years, this time scale offers considerable scope for inequalities to emerge between those at the front and the back of queue.

In addition, foundation trusts will reduce the redistribution of resources within the NHS. Under the current system, surpluses and asset sale proceeds are transferred into a central NHS funding pool and then redistributed according to need. This will vanish with foundation trusts, which will be able to keep all operating surpluses and asset sale proceeds.

The second reason for UNISON’s continued opposition to foundation trusts is that we do not believe they will deliver the benefits the government claims they will. Its two main claims for foundation trusts are that they will improve local accountability and social ownership, and that they will free up staff to deliver better services to patients. But neither of these claims stands up to scrutiny.

Foundation status will clearly give greater freedoms to hospital chief executives and finance directors. But it is at unclear how foundation status will help staff deliver better care to NHS patients – and few examples have been forthcoming from the government.

The true barriers to improved patient care are not hospitals’ ultimate accountability to Whitehall or their inability to borrow from the private sector. What holds back the development of patient care is more likely to be poor management, insufficient training opportunities or simply the impact of previous underfunding. Many of these problems are now beginning to be remedied by the government.

Neither do foundation trusts appear likely to deliver increased social ownership and local accountability. The trusts will define their own constituencies. There is no guarantee that foundation trust members will be representative of the local community or a hospital’s users: trust members will be self-selecting. And if the members of a foundation trust feel strongly about an issue, it is unclear how effectively they will be able to make their views heard and how much power they will have to achieve change.

Finally, and perhaps most importantly of all, they are part of a wider process of marketisation in the NHS. This process of has three fundamental elements:

• First is the government’s stated desire to move towards an NHS in which there is a multiplicity of healthcare providers spanning the public and private sectors, and in which the private sector is a ‘permanent feature’ of the NHS landscape;
• Second is the reintroduction of competition between providers. Under plans published by the DoH last year, the NHS will gradually move towards a new financial system in which providers will compete against each other for patients, with payment taking the form of a fee for each patient treated. Providers who gain patients will receive more income, while providers who lose patients will face financial difficulties;
• Third is the introduction of patient choice, which is the mechanism by which decisions about which providers receive business will be made. The government has pledged that, from 2005, all patients and GPs booking hospital appointments will be able to select the hospital of their choosing, which may be in either the public or private sector.

So how do foundation trusts fit into this picture? They will be part of the new multiplicity of healthcare providers, with a blurred status somewhere between NHS bodies and independent sector hospitals.

They will have strong incentives to compete with other hospitals for patients as, unlike current NHS hospitals, they will be able to retain surpluses and use extra income to service private sector borrowing – incentives that will gradually apply to more and more hospitals as more and more attain foundation status. In short, there is a real danger that foundation trusts could end up undermining the services provided by other hospitals. Relatively small changes in patient demand could destabilise smaller general hospitals, forcing them to close services to remain viable.

A further straw in the wind is the regulation of foundation hospitals. They will not be answerable to the health secretary but instead will be regulated by an independent regulator on the basis of vaguely defined principles. This mirrors the experience of other sectors such as telecommunications and the utilities in the 1980s and 1990s, where the government handing over power to independent regulators accompanied marketisation.

In the long run, it may well be that one of the most significant functions of foundation hospitals is to draw attention to the increasing marketisation of the NHS. It will destroy the NHS, not improve it. We all need to campaign against the government’s programme of NHS marketisation and make the case for alternatives that build on the many other positive initiatives the government has launched, which are rooted in truly public service values.