This short briefing describes how regulation of health care organisations (rather than of health care professionals) in England has developed and outlines how the coalition government is proposing to change the current structure.
What is regulation?
Regulation of health care in England comprises two main elements: regulation of the quality and safety of care offered by health care providers, currently undertaken by the Care Quality Commission (CQC), and regulation of the market in health care services, currently the responsibility of Monitor (in relation to foundation trusts) and the Department of Health.
How has market regulation been carried out previously?
Some NHS services have always been provided by private sector bodies – most GPs are in fact independent contractors. The previous government, however, actively promoted an expansion of private provision of hospital and community services, with the aim of creating a mixed economy in which any willing – and licensed – provider could offer services to NHS patients. Patients, or commissioners on their behalf, were free to choose between them.
This led to the need for a new form of regulation to ensure that market forces worked to the benefit of patients. The introduction of the policy allowing patients to choose where they received hospital treatment required a new hospital payment system that reimbursed hospitals for the number of patients treated and the types of treatment given. The Department of Health decided to set a national tariff for most hospital activity, to encourage competition on the basis of quality of service, rather than cost. The Co-operation and Competition Panel was established to offer advice to ministers on mergers of NHS bodies – as these could reduce the extent of competition – and to monitor how commissioners adhered to rules on when to tender for services. Private sector providers could appeal to the panel if they felt they had not been given a fair opportunity to compete.
To strengthen the ability of NHS providers to respond to market opportunities, the government introduced a new form of NHS organisation, the foundation trust. These enjoyed greater financial freedoms than traditional NHS trusts, as well as freedom from the direct control of the Secretary of State. A new regulator, Monitor, was established to vet applications for foundation trust status and to oversee their financial performance once they were in operation.
How has quality and safety regulation been carried out previously?
In 1997, there was no national policy covering all aspects of safety and quality of health care provision. The White Paper, The new NHS, modern, dependable (1997) concluded that the quality of care provided by the NHS had been 'variable' and that the service had been slow to respond to 'serious lapses in quality', a reference to the Bristol Royal Infirmary case. The Commission for Healthcare Improvement (CHI) was established by the Health Act 1999 to offer guidance to NHS providers on clinical governance.
The Healthcare Commission was established in 2003 to bring together the work of CHI, the National Standards Commission (the independent regulatory body responsible for inspecting and regulating residential and domiciliary care) and also the efficiency work relating to the NHS that was carried out by the Audit Commission. The Healthcare Commission’s roles included inspecting NHS providers, assessing their performance against national standards, and recommending special measures where performance was particularly poor. It also published an annual report to parliament on the state of NHS services.
The Healthcare Commission was more independent of government than its predecessors – it was accountable directly to parliament and commissioners were appointed by the Independent Appointments Commission.
Pressure to reduce the number of regulators following reviews by the government and by the Department of Health (Office of Public Sector Reform 2003,;Reconfiguring the Department of Health’s Arm’s Length Bodies,2004) led to the establishment of the CQC ,which brought together the Healthcare Commission, the Commission for Social Care Inspection and the Mental Health Act Commission (which safeguarded people detained in hospital under the Mental Health Act 1983). The CQC became fully operational in 2009, taking over most functions of the Healthcare Commission. In addition, since 2010, all providers of health care in England, including NHS providers, independent providers and foundation trusts have been legally obliged to register with the CQC. Registration requirements cover areas such as the management and training of staff, the state of premises and provision of information.
What is the coalition government proposing in its NHS White Paper?
The coalition government proposals are designed to take the development of a mixed economy further, and to extend the role of the independent regulators and reduce that of the Department of Health.
The key proposals relating to regulation are as follows.
- Monitor will become the economic regulator for all health and social care in England. It will license all providers of NHS services and will have the power to impose special licence conditions to promote competition or to maintain continuity of services.
- The CQC will retain responsibility for the regulation of quality.
- Monitor will set the tariff for NHS-funded services and will work together with the NHS Commissioning Board – the new organisation set up to carry out some national commissioning functions –in developing tariffs and prices.
- The Co-operation and Competition Panel will be absorbed into Monitor, but eventually the NHS will come within the remit of the Office of Fair Trading and general UK as well as EU competition law.
- All NHS providers should become foundation trusts by 2013, and the NHS trust legislative model will be repealed in due course. The coalition government has proposed greater freedom for foundation trusts, for example, in respect of their governance arrangements, their ability to raise capital and their ability to raise income from private patients.
- Monitor will have responsibility for continuity of essential trust services, for example in the event of financial failure.
Will these proposals be effective?
There is no hard evidence to draw on in order to make an appraisal of these proposals. International comparisons are of limited value. A publication by The King's Fund, How to Regulate Health Care in England, an international perspective (2006), reviewed regulation in four health care systems – New Zealand, Catalonia, Germany and the Netherlands – all of which have similarities with the English NHS. All five countries have to regulate a health care system comprising public, for-profit and not-for-profit independent providers. The report found that even though those health systems share many objectives with the NHS there is no agreement on the best way to regulate health care systems, and regulation must be appropriate to the particular structure of each system.
The regulatory framework of health care in England is still developing – the government's proposals leave a number of areas unclear. In particular, the boundaries between the respective roles of the regulators and between them and the NHS Commissioning Board and the Secretary of State will need clarification. For example, the national tariff currently serves objectives formerly set by ministers. Whether ministers can refrain from involving themselves in such issues once they become the responsibility of Monitor remains to be seen.
Questions for the future
- What should be the objectives of the economic regulator and who should set them? If prices are to be set, who should do this?
- Should price competition be allowed?
- Is there a tension between promoting co-operation, networking and integration and maintaining competition? If so, how should it be resolved?
- In which services is competition appropriate and inappropriate?
- How – if at all – will local commissioners, the new GP consortia, be regulated?