National Health Service (Licensing and Pricing) Regulations 2013

Baroness Finlay of Llandaff Excerpts

Wednesday 10th July 2013 Grand Committee

These regulations will help to enable Monitor to undertake fair and proportionate regulatory action, and will support a fair and transparent system for setting tariff prices. I commend the regulations to the Committee.

[Baroness Finlay of Llandaff]

I have a short query, which I hope that the Minister can clarify for me. It relates to the cross-border flow between England and Wales, either of providers or patients as users of services where NHS Wales is paying for services provided by NHS England or a provider in England. I would like reassurance that there will be no way that the experience of patients going from Wales into England, or the ability for providers from Wales to provide services to patients along the border, are in any way jeopardised within these arrangements and that they have equality within the provision.

[Lord Hunt of Kings Heath]

My Lords, I declare an interest as chair of an NHS foundation trust, president elect of GS1 UK and a consultant and trainer with Cumberlege Connections. I am grateful to the Minister for his explanation of these regulations. I want to put a few points to him.

I start with Part 2 on licensing, specifically paragraph 3 concerning monetary penalties. Can I ask the Minister about the logic of fining providers, when all that happens is that worse care will be provided for patients as the organisation will have less money? I think that the figure of up to 10% of turnover would virtually bankrupt most providers. While I certainly accept the need for penalties and consequences for failure, I wonder whether they would be better being not financial, as the reality is that they will not happen in many cases because the people who suffer will be those who get services. I just wonder about the logic of that.

It took NHS England months to wake up to the fact that the A&E problems were to do with the failure of systems, but for months it was pressing CCGs in some parts of the country to fine hospitals for poor A&E performance. I think that NHS England has completely lost the plot when it comes to understanding what is happening in the health service. I cannot think of a more hopeless response to the crisis than to come along and say, “We should fine hospitals”. I worry about this whole approach to fining. I say to the Minister that there are very limited signs that systems understand the winter problems and there is a real reluctance to get to grips with what needs to happen. This is a worry for the future which may not have much to do with the regulations, but my seeing the Minister here represents a good opportunity to raise them with him.

Does the Minister think that fines and targets can lead to some perverse incentives? Of course, it is right to issue targets, but I wonder whether the Minister might comment on a very interesting section of the Chief Medical Officer’s Report for 2013, published earlier this year, where she refers to the low number of instances of MRSA and C. diff. I do not think that there is any doubt that the targets that were set for the health service have been responsible for the focus that has led to this very welcome improvement. My understanding is that part of the response to this by the NHS has been to use antibiotics which should have been reserved for hard-to-treat infections. There is now real concern that the antibiotics that go with those hard-to-treat infections have been used rather widely, which is causing great problems in more general infection control. According to the CMO, while the typical, large, 1,000-bed acute NHS hospital has two to three MRSA bacteraemias per year and 50 to 60 C. diff cases, 400 to 500 bacteraemias involving Gram-negative bacteria can occur in a 1,000-bed-type hospital, 10% to 15% of them being due to strains resistance to those antibiotics for hard-to-treat infections. You can reach a point where individual targets become counterproductive because the focus of the NHS is simply on C. diff and MRSA and not on the wider infections which clearly need to be tackled as well.

Will the regulations lead to more specific targeting which can in turn lead to perverse incentives, or is a more sophisticated approach likely to be taken? It is clear that the Chief Medical Officer is concerned about the way in which some MRSA and C. diff targets are leading to perverse behaviours.

On Part 3, the rationale for each of the thresholds described for penalties, prices and licence changes has not been explained in relation to an evidence base. In other words, why are the thresholds where they are? What work has been done to suggest that those are the right thresholds? Of course, now they will only be tested post-implementation, but it would have been good to have seen a clearer review mechanism that enabled a sensible approach.

In respect of the mechanisms to lodge an objection to the pricing methodology, my understanding is that the Foundation Trust Network has stated throughout the development of the policy that the 51% threshold for an objection, together with the denominator comprising all tariff services, is too high a threshold to be met. Is the noble Earl prepared to look at this? That might be a reasonable approach for general objections to the general approach, but it is insufficiently sensitive to address sections of the tariff that may be inadequately compensated—cancer services, for example. The noble Earl will be aware that there were issues around the tariff for children’s services and women’s services. My reading of that is that if you were a specialist adviser your chances of reaching the 51% threshold would be very limited. Could this be looked at?

If my noble friend Lord Warner were here I am sure he would raise this. It is the question of what happens to non-foundation trusts. I know that Monitor is working closely with the NHS Trust Development Authority, but I would welcome clarity about what will happen to trusts outside Monitor’s remit to ensure that there is an even-handed approach across all providers in the sector. No one is more admiring of the work of Sir Peter Carr as chair of the NHS Trust Development Authority. The noble Earl knows that Sir Peter has held chairmanships under both Governments for many years. While he is a marvellous person, there is a fear that he will hold the chairmanship of the NHS Trust Development Authority for many years to come because of the issue about what on earth will happen to those non-foundation trusts that are clearly not going to reach FT status any time soon.

The noble Earl mentioned the Competition Commission.

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[Earl Howe]

I take the noble Lord’s point about uncertainty and confusion that I know exists in certain parts of the health service as to what all this means. I can tell him that officials in the department have had some very productive discussions with both the OFT and the Competition Commission to ensure that their approach need not set unnecessary hares running as regards apprehensions that a purist competition-based approach will be taken by these bodies. I am satisfied that that will not happen. My advice is that the Competition Commission, in particular, has welcomed the input of departmental officials in terms of the factors that need to be brought into play when making a judgment on what is in the best interests of the health service and patients.

At the same time I am aware that a number of useful events and conversations took place within the health service itself when we clarified with providers the considerations that the OFT and the Competition Commission will look at in proposed mergers. We are ensuring that when proposals are made the benefits of mergers are clearly defined in terms that will resonate with the competition authorities. The noble Lord is right that we are in new territory in many senses, but I am optimistic that the system will work in the way that it should. It is certainly about looking at competition aspects but, more pertinently, looking at the criteria that I mentioned earlier, such as the public interest in the case of licence modifications, the test of appropriateness in pricing methodology, and in the case of mergers, the interests of patients in the health service. The OFT and the Competition Commission must take into account the benefits of a proposed reconfiguration if they consider it under the Enterprise Act 2002. I remind noble Lords that that is the governing Act, so in theory at least, we have been in this situation for more than 10 years. In doing so the competition authorities must consider whether those benefits would outweigh any substantial lessening of competition that they find.

The noble Lord asked about the tariff, and in particular, primary care. We agree that payment mechanisms need to be aligned to drive better outcomes and better value for patients. They also need to be responsive and flexible, for example to enable services to be provided in an integrated way. Monitor and NHS England will work together to move the tariff in this direction. They are best placed to do that given their different roles.

The noble Lord asked me what would happen if the tariff proved to be inadequate. We expect the tariff in future more closely to relate to the costs of providing particular services. If the price payable for a service would make it uneconomic for a provider to provide a service, Sections 124 and 125 of the 2012 Act provide for a process for local modifications of the price payable.

My advice is that NHS England and Monitor are working very well together in this regard. Guiding principles have been defined and six shared principles for pricing have been agreed: that the pricing mechanism should enable and promote improvements in care for patients and taxpayers; that it should enable efficient providers to earn appropriate reimbursement for their services; that it should have regard to sustain the NHS offer in the long run; that it should not preclude the delivery of the Secretary of State’s mandate for NHS England; that it should have regard to the principles of better regulation; and that it should support movement towards a fairer playing field for providers.

I hope that I have answered most if not all the questions, but I undertake to write to noble Lords if I have failed to do that.

[Baroness Finlay of Llandaff]

I seek a small point of clarification. I take the example of a Welsh provider that is providing services for Welsh patients and that is also licensed to provide for patients coming across from England. In the event of them being deemed not to meet the conditions and therefore a fine potentially being levied at 10%, would that be only 10% of the contract issued on behalf of the English patients? Two very different healthcare systems will be operating.

I realise that this is complex, but the two healthcare systems are becoming more divergent yet the population on the border has to access both sides, I am concerned that these are some of the things that need to be clarified. It is a detail, I know.

[Earl Howe]

My Lords, it would only be the turnover relating to English patients that would govern that particular equation.