The Private Patient Income Cap

1. The Private Patient Income Cap Paul Betts FTN Economic Adviser 7 April 2011 FTGA Development Days – Workshop C

2. What is the private patient income cap? • Section 44 of the 2006 Act requires that the proportion of private patient income to the total patient related income of NHS foundation trusts should not exceed its proportion whilst the body was an NHS Trust in 2002/03 (the Private Patient Cap). • Private charges means charges imposed in respect of goods and services provided to patients other than patients being provided with goods and services for the purposes of the health service. • Open to confusion over which services are being provided (indirectly or directly) to private patients. Sounds simple but... FTGA Development Days – Workshop C

3. A tightening of the rules in 2010 Unison in 2008 indicated that they were going to take Monitor to judicial review over their interpretation of the cap. • Key Questions: • Is it just services provided directly by the FT or other arrangements such as joint ventures? • What about when an FT provides a service to an organisation which in turn provides services to private patients? • Outcome: • High Court ruling in December that Monitor’s previous guidance was unlawful. • Led to FTs having to recalculate their private income under the new rules but not to having to restate their accounts for the past few years. FTGA Development Days – Workshop C

4. What does it mean for individual organisations? • Of the 89 FTs at the time 26 (30%) had a cap of 0 • Only 5 organisations have a cap above 5% Source: Monitor, 2009 FTGA Development Days – Workshop C

5. How has it worked so far? Although the amount of private patient income earned has increased, as a proportion of total income it has actually gone down Source: Laing & Buisson NHS Financial Report 2009 FTGA Development Days – Workshop C

6. Why does the government want to remove the cap? (1/3) It prevents useful, beneficial, NHS work that FTs could be doing • Creation of a new cardiac centre: • A trust opens a new Cardiac Centre that provides services to both private and NHS patients. Private services are performed by an independent company in facilities that it rents within the Cardiac Centre from the Trust • Benefits: • The business case for the capital investment is more affordable • • The additional income can be reinvested in the provision of NHS services • • Improved clinical safety through increased consultant cover. • • Assists in the recruitment and retention of cardiologists for the Trust; and • • No adverse impact on the range and volume of care provided to NHS patients FTGA Development Days – Workshop C

7. Why does the government want to remove the cap? (2/3) It prevents income from privately funded work which could be invested in improving services for NHS patients FTGA Development Days – Workshop C

8. Why does the government want to remove the cap? (3/3) It does not fit with the wider vision for the NHS & public services • It is not a level playing field in the NHS. NHS trusts do not have the same restriction. In some cases it would prevent organisations becoming a foundation trust. • It is not a level playing field versus the private sector. i.e. They can compete for NHS services and potentially use their private work to subsidise their NHS prices. FTGA Development Days – Workshop C

9. How can the government be assured that hospitals will not prioritise private patients? There are already checks and balances on FTs to ensure they act appropriately and do not jeopardise NHS care Other possibilities? FTGA Development Days – Workshop C

10. Example from Guy’s & St. Thomas constitution 3. PRINCIPAL PURPOSE 3.1 The Trust’s principal purpose shall be the provision of goods and services for the purposes of the National Health Service in England. 4. OTHER PURPOSES 4.1 Without prejudice to the Trust’s principal purpose, the further purpose of the Trust shall be to provide goods and services for purposes related to the provision of health care in accordance with its statutory powers and duties and the terms of the Independent Regulator’s authorisation. 4.2 The Trust may also carry on activities other than those mentioned above subject to any restrictions contained in the Independent Regulator’s authorisation. These activities shall be for the purpose of making additional income available in order to carry on the Trust’s principal purpose better FTGA Development Days – Workshop C

11. What is the specific role of governors around the private patient income cap? • Specific duty to represent the interests of members as a whole and the interests of the public. • Influence Strategic Direction • A statutory duty to hold the Board to account • Governors to receive board minutes and agendas • A right to call some or all directors to a meeting to answer questions • A role in approving constitutional change • A role in the approval of major transactions (these to be defined in the constitution) • A role in approval of other significant transactions (acquisitions & mergers) FTGA Development Days – Workshop C

12. Questions? Paul Betts Economic Adviser – Foundation Trust Network Paul.betts@nhsconfed.org 020 7074 3268 FTGA Development Days – Workshop C

13. AppendixIncreasing role for governors FTGA Development Days – Workshop C

14. Changes to FT Governance (2) New Arrangements for Governors • Councils, not boards of governors. • Greater flexibility in rules for appointed governors. • Specific duty to hold NEDs collectively and individually to account. • Specific duty to represent the interests of members as a whole and the interests of the public. • Power to require one or more directors to attend a meeting to answer questions. • Governors to approve mergers, acquisitions and significant transactions (to be defined in constitution). FTGA Development Days – Workshop C

15. Changes to FT Governance (3) Management & governance • Directors and governors to approve constitutional changes. • Duty on directors to equip governors with the skills they need to do their job. • Governors to receive board minutes and agendas. • Panel to advise governors. • Removal of borrowing limits. • Private income cap removed. • Secretary of state to have power to change voting arrangements FTGA Development Days – Workshop C

16. New Accountability Relationships The Role of Governors • Governor bodies will still: • Carry out statutory duties • Appoint/remove Chair and NEDs • Chair/NED remuneration • Approve/not approve appointment of CE • Appoint/remove auditor • Receive annual accounts, annual report and any auditors report - Represent the interests of members - Influence Strategic Direction FTGA Development Days – Workshop C

17. The Role of Governors An Expanded Role as Proxy for Ownership • A statutory duty to hold the BoD to account • A role in approving constitutional change • A role in the approval of major transactions (these to be defined in the constitution) • A role in approval of other significant transactions • A right to call some or all directors to a meeting to answer questions FTGA Development Days – Workshop C

18. The Expanded Role Supporting Governors • No requirement to appoint commissioners as governors, new powers for FTs to appoint governors to ensure the right balance of capacity and capability within the governor body • But still a pressing need for training and development for governors in their new role - a manageable risk to FT governance • Elected public governors will still be the majority FTGA Development Days – Workshop C

19. The Governor Role will be crucial Developing Relationships • Equipping governors to do their job and ensuring that governors understand their role will be crucial. • Having the right infrastructure to support good governance will be equally important. • But structures and processes should be the context for building sound relationships, not a substitute. FTGA Development Days – Workshop C