Monitor 17 may all presentations for website.ppt

Working together

for patients

Friday 17 May 2013

Programme

2

10.10am David Bennett, Chief Executive and Chair

11am Our monitoring and enforcement approach - Adam Cayley, Regional

Director

11.40am Ensuring the continuity of services - Stephen Hay, Managing Director of

Provider Regulation

12.20pm Lunch

1pm How does Monitor intend to safeguard choice, prevent anti-competitive

behaviour and facilitate integrated care? Catherine Davies, Executive

Director of Cooperation and Competition

1.40pm Assessing transactions - Martin Smith, Assessment Director (M&A)

2.10pm Developing an effective and fair payment system - Jason Mann, Interim

Director of Pricing

3.00pm How do you think our regulatory model needs to evolve to help you

provide better care? Panel session

3.30pm Close

David Bennett,

Chief Executive

and Chair

Goals: Public providers

well-led

Essential

services

maintained

Reimbursement

rewards &

incentivises

Procurement, choice

& competition work

for patients

Focus:

Tools: Rules, incentives, information

Oversight of providers and the transactions involving them

Monitor‟s role

Functions: PricingCooperation &

CompetitionProvider

Regulation

Assessment

5

Executive Director of

Cooperation and

Competition

Catherine Davies


Assessment

Miranda Carter

Managing Director of

Sector Development

Adrian Masters

Managing Director of

Provider Regulation

Stephen Hay


Organisation

Transformation

Fiona Knight


Strategic

Communications

Sue Meeson


Legal Services

Kate Moore


Patient & Clinical

Engagement

TBA

Monitor‟s Executive Team

Chief Executive &

Chair

David Bennett

One guiding principle

To do always what is in the best

interests of patients

Our approach to

monitoring and

enforcement

Adam Cayley, Regional Director

(Midlands & East of England)

New provider licence

• sets out range of conditions providers of NHS-

funded services must meet

• Monitor‟s key tool for carrying out functions

• all providers of NHS services required to hold

licence, unless exempt

• foundation trusts licensed now

• other eligible providers licensed from April 2014

Key licence conditions

Condition FT4 – NHS Foundation Trust

Governance Arrangements

Condition CoS 3 – Monitor Risk Rating

Condition CoS 6 – Co-operation in the

event of financial stress

Enforcement steps

Trigger• Intelligence and information (RAF)

Assesses how financially viable providers of

key NHS services are

Assesses whether FTs taking sufficient steps

to secure compliance with governance

condition

Compliance Framework/

Risk Assessment Framework

COS 3

and 6

FT 4

Helps Monitor assess whether there is RISK of licence breach:

• does Monitor need more information?

• should Monitor open formal investigation?

11

We will assess financial risk at

CRS providers prospectively

Forward

plan

Quarterly

financial

information

Material

financial

event

collect information from CRS providers and

calculate risk rating

update risk rating each quarter on year-to-date basis

recalculate financial risk to reflect material financial

event (e.g. large transactions, profit warnings)

12

4-point Continuity of Services

risk rating

Medium risk

Monthly monitoring

Risk rating

4

2

1

3

High risk

Potential licence breach and

investigation

No evident risk

Quarterly monitoring

Regulatory implications

High risk

Potential licence breach and

investigation

1323/05/2013

Liquidity ratio

(days)

Weight

Can provider meet

immediate cash

requirements, e.g. paying

suppliers & salaries?

Definition

Capital service

capacity (times)

Working capital balance x 360

Annual operating

expenses

Revenue available for Debt

Service

Annual debt service

Metric

Risk rating derived in following way

Can provider meet

medium-term financing

requirements, e.g.

PDC dividends, interest

payments, debt payments

and PFI obligations?

1423/05/2013

Proposed approach on governance

(foundation trusts)

Governance rating

Regular governance reviews

Forward plan reviews

Corporate governance statement

Do we need

more

information?

Should we

open an

investigation?

1523/05/2013

We‟ll look at up to six key areas

CQC concerns

Access

3rd party reports

Staff & patient

trends

Financial risk

Outcomes

Warning notices or civil/ criminal actions

Meeting national standards

Meeting national standards

- including MRSA, C.Diff

e.g. Healthwatch, patient groups, auditors,

commissioners, HSE, ombudsman, coroners

e.g. friends & family test, staff turnover, staff

absenteeism

Poor financial planning/management

Sample triggersArea of focus

1623/05/2013

Rating indicates degree of concern and

any action we are taking

No evident concerns

Concern identified – need for further information

identified

Potential breach of governance condition identified -

investigation underway

Material governance issue – regulatory action

possible or under consideration

Breach of governance condition with formal action

taken by Monitor

Rating Description

1723/05/2013

Working with our partners

Regulatory teams have same regional structure as

Open dialogue with all other regulators and national

public sector bodies to identify risk - meet regularly

through the Quality Surveillance Group network

As Monitor and CQC approaches change we‟ll work

together to ensure they‟re complementary and

licence failures identified and addressed

23/05/2013

Position after consultation on

Risk Assessment Framework

23/05/2013

Approach towards large PFIs – appear structurally weaker but may

not be unstable:

– Likely to clarify our approach but not change basis of rating

Volumes of trusts falling into monthly monitoring:

– Estimate 15-20 trusts (similar number to now)

– Request subset of quarterly return

– May not be automatic

Requirement for 3 yearly governance reviews:

– Considering whether alternative ways for Monitor to gain assurance

Enforcement steps

23/05/2013

Trigger• Intelligence and information (RAF) – may suggest potential problem

Prioritise

• Benefit to patients

Prioritisation

• consider benefits and costs of action

• then might consider formal, informal or no action

Act proportionately

• proportionate and reasonable

• balance need to deter poor/harmful conduct with need to

ensure continued provision of health care services to

patients

2123/05/2013

Enforcement steps

23/05/2013


Prioritise


• Cost

Investigate

• Formalise and publicise our concern

• Consult with stakeholders

• Escalate provider and request information

Lines of investigation

• Patients

• Process

• Problem

• Plans

• People

• Performance

2323/05/2013

Enforcement steps

23/05/2013


Prioritise


• Cost

Investigate




Enforce• Requirements or Undertakings to improve

Monitor‟s licence enforcement

powers

Discretionary requirements (S105)

Enforcement undertakings (S106)

Additional powers for foundation trusts

Licence revocation

(in exceptional circumstances)

2523/05/2013

Licence notices and challenges

exposed

23/05/2013

19 trusts (13%) in breach of one or more aspects of

licence:

– 13: corporate or quality governance issues

– 10: emergency care issues

– 15: financial issues

– 9: strategic planning issues

Number in breach remained steady in move to

new regime

Enforcement steps

23/05/2013


Prioritise


• Cost

Investigate




Enforce• Requirements or Undertakings to improve

Monitor response

• Track improvement

• Further action if licence notices not complied with

23/05/2013

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Q1 08/09

Q2 Q3 Q4 Q1 09/10

Q2 Q3 Q4 Q1 10/11

Q2 Q3 Q4 Q1 11/12

Q2 Q3 Q4 Q1 12/13

Q2 Q3 Jan

all sig breach as % of sector finance sig breach as % of sector

governance sig breach as % of sector

Foundation trusts in breach

Ensuring the

continuity of

services

Stephen Hay, Managing Director of

Provider Regulation

Clear need for a continuity of services

regime

23 May 2013 30

• Our primary objective is interests of health care users

• Some provider difficulties inevitable

• If turnaround isn‟t possible, Monitor must focus on

protecting services

• Critical decision factors:

• ability of provider to fix its own problems

• wider L.H.E issues

• major concerns about quality or clinical safety

23 May 2013 31

Objective of the Continuity of

Services regime

The licence conditions help us

achieve our objective

32

4) Ensure resources remain available to provide

CRS/LSS

3) Incentivise prudent financial management (to reduce

risk of failure)

2) Provide support to commissioners to protect

patients if failure occurs

1) Protect continuity of services in event of failure

Defining Commissioner Requested

Services & Location Specific Services

23 May 2013 33

• CRS subject to CoS regulation

• Need to be retained in event of provider

failure

• Commissioners should define them with

“regard” to our guidance

• LSS can‟t be provided elsewhere

• Formally defined when provider placed

into administration

• Likely to be subset of CRS

LSS

CRS

Transition from mandatory services to

CRS

Mandatory services

„Grandfathered‟ to CRS as transition

arrangement

Continuity of Services conditions

apply to all providers of CRS

Commissioners use guidance to

designate services as appropriate

23 May 2013 34

3 YEAR SUNSET CLAUSE

FT mandatory

servicesLSS LSS

CRSCRS

FT

mandatory

services

Commissioners designate services as

appropriate to their health economy

23/05/2013 35

“Rural

Area”

“Urban

Area”

Regulate & Protect

Choice

&

Plurality

CRS/LSS CRS/LSS

Key elements of CoS regime

23 May 2013 36

CRS CRS providers subject to CoS regime

CoS

Licence

regime

Risk Assessment Framework (RAF)

Contingency Planning Team (CPT)

Trust Special Administrators

Licence based obligations

Health Special Administrators

Enforcement s.105 and s.106 undertakings

Roles of Contingency Planning Team

& Trust Special Administrator

37

CPT

• Non-statutory appointment

• Work with local commissioners to identify potential LSS

• Engagement of stakeholders

• Develop options for “next steps”

• Options may include solvent restructuring

TSA

• Statutory appointment

• Business as usual

• Define LSS

• Develop options for Trust

• Formal public consultation

The stages of the regime

Stage 1:

Normal

operations

Stage 3:

Provider

distress

Stage 4:

Provider

failure

Stage 5:

Solution

CPT and/or Special Administration regime last resort and used sparingly

Stage 2:

Concern

TSA not an inevitable successor to

CPT

23 May 2013 39

CPT

Solvent

Restructuring

led by provider

and / or CCGs

TSA

DECISION

Appointment of TSA has implications for

Foundation Trust

Board would be

suspended…

…but Exec Directors

continue as employees

TSA develops plan for FT in

context of L.H.E

TSA is independent of Monitor

Continued Business as

usual

23 May 2013 40

What does TSA have to deliver?

23 May 2013 41

• LSS definition has key role

• Provides focus for commissioners

Solution development

Business as usual

•Emphasis placed on „day to day‟ running

• Important TSA seen by staff, and is credible and accessible

Key components of TSA delivery

23 May 2013 42

•Need to engage stakeholders throughout

•Helps ensure recommendations are „bought into‟ by community

Stakeholder engagement

•Monitor cannot direct the TSA

•We must ensure objective and duties of TSA achieved

Monitor‟s role

Market testing

•Market testing helps identify potential providers

•Leads to most efficient solution

CoS funding regime will be more

transparent & rules-based (i)

23 May 2013 43

Service reconfiguration in normal conditions or

‘concern’ stage

FTs and NHS trusts:

Loans and/or PDC

Other providers:

Shareholders / banks / etc.


transparent & rules-based (ii)

23 May 2013 44

Contingency planning and solvent restructuring

Contingency Planning Team –

funded by Monitor

Deficit funding & solvent

restructuring -

Loans and/or PDC (NHS FTs)

Shareholders/banks etc


transparent & rules-based (iii)

23 May 2013 45

Trust Special Administration and insolvent restructuring

Envisaged that eventually funded by

Monitor Risk Pool

In interim period,

• Special Administrator paid by Risk

Pool funded by DH

• TSA Solution Development Phase:

deficit funded by DH via PDC.

• TSA Implementation Phase funded by

loans &/or PDC

What the regime means for you (i)

23 May 2013 46

What the regime means for you (ii)

23 May 2013 47

Post intervention

Maintain BAU TSA not automaticA solution will be

developedYour Trust plays

its part in process

Pre intervention

Engage with usEnsure that you fully understand your

business

Monitor‟s focus is on patients

How does Monitor intend

to safeguard

choice, prevent anti-

competitive behaviour

and facilitate integrated

care? Catherine Davies, Executive

Director Co-operation and

Competition

Who we are (1)

Co-operation & Competition Panel created in 2008

Advised DH and Monitor on application of Principles and

Rules to:

• 156 mergers

• 11 conduct cases

• 5 procurement cases

• 2 studies

Provided advice in relation to c.900 requests for informal

advice

49

Who we are (2)

Panel now integral part of Monitor and continues to advise

40 staff - Case Managers, Clinical

Staff, Economists, Lawyers, Admin

Set of tools to deliver better outcomes for patients - higher

quality, better value, innovation

50

What we do (1)

Protect and promote the interests of patients

• with a view to preventing anti-competitive behaviour against

interests of patients

Powers set by Parliament - we operate within context of

government policy

51

What we do (2)

Ensure competition operates fairly in interests of patients

and prevent anti-competitive behaviour in NHS

4 key areas:

• Provider licence

• Concurrent powers

• Procurement, patient choice and competition regs

• Mergers

52

Area of provider

activity

What applies Before Key point

Referring patients HSCA/licence PRCC Make info on choice available and

act fairly

Interactions with

providers of

similar services

HSCA/licence

CA98/TFEU

PRCC

CA98/TFEU

Do not agree to prevent, restrict or

distort competition

Decisions not to

provide or accept

services

HSCA/licence

CA98/TFEU

PRCC

CA98/TFEU

Conduct of one organisation that

prevents, restricts or distorts

competition, e.g. exploiting

incumbency advantage

Transactions EA02, policy

rules

PRCC OFT/CC likely to review to decide

whether substantial lessening of

competition; we advise on benefits

Integrated Care HSCA/licence PRCC Do not do anything that could

reasonably be regarded as

detrimental to Integrated Care

What we do (3)

53

How we do it (1)

Decide how to use our resources in most effective way

• Prioritisation criteria

Accessible and helpful

• Call or email us with queries

• We will invite you to events and attend your events

54

How we do it (2)

Open and transparent processes e.g. some typical steps:

• Decisions to accept cases

• Working papers

• Provisional and final decisions

Analyse effects of agreements or conduct using

cost/benefit analysis

Clinical input into decisions

55

What you need to do (1)

Read our draft guidance documents

Take compliance with competition rules seriously

• Does your Exec team and Board understand the rules?

• NHS Trusts have to self-certify when applying for licence

56

What you need to do (2)

Agreements/discussions with other providers?

• Same services, especially where choice exists (elective care)

Identify opportunities

• Competition allows successful organisation to build on success for

benefit of customers (patients)

Approach us if you are not sure when/how rules apply

57

Busting a few myths (1)

We don‟t have to choose between competition on the one

hand and co-operation and integration on the other

Competition rules don‟t prevent providers from working

together, sharing best practice and innovating

Competition doesn‟t lead to fragmentation of NHS

58

Busting a few myths (2)

Competition isn‟t the first step towards privatising NHS

Monitor won‟t force more competition on NHS

Patients do want choice

59

Assessing transactions

Presenter: Martin

Smith, Assessment Director

(M&A)

Rationale for transactions – what we

are told

Key elements of strategic rationale

Supporting arguments

• Clinical scale / safety considerations

• Cost savings

• Estate utilisation

• Transfer of best practice

61

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9

31 TCS

transactions, 2 FT

acquisitions of

NHS trusts

Sig

nific

ant tr

ansactions

2008/092007/082007/082006/07 2010/112009/10 2011/12 2012/13

Setting the context – transaction history

8 PCT Asset

transfers, 2 FT

acquisitions of NHS

trusts

62

Our current approach

Monitor’s role to risk

rate and approve

where required

• Review triggered by

thresholds

• Key risks

identified, considered and

addressed

• Integration properly

planned

Promote an effective process which secures:

Sustainable services Better governance

True integration Improved patient care

63

Indicative risk rating

23 May 2013 64

Financial Risk Rating 5 4 3 2 1

Low

We would not expect a Board to

enter into transaction unless

satisfied it can mitigate the risks

GreenGovernanceRisk Rating

High

Red

(Assessor case)

(Adjusted for

transaction risks)

How does transaction assessment

process fit with competition regime?

From July 2012, Health & Social Care Act confirmed

mergers involving an FT are subject to review under

Enterprise Act

65

1OFT decides no

relevant merger

situation

Transaction

assessment

commences



66

OFT review – finds no

realistic prospect of

significant lessening of

competition (SLC)

Transaction

assessment

commences

40 days

2



67

OFT review – refers case

to Competition Commission

for investigation and report

Competition

Commission

merger enquiry

If positive

and

sufficient

information,

commence

Provisional

findings

Final

report

40 days Up to 24 weeks (can be extended)

3

Lessons learned

Strategic Rationale

Clinical due diligence

People

Integration Plan

Transfer v Transformation

Project Management

Myths

• investment adjustments

Monitor‟s requirements

are too onerous and risk averse

• new models of care which bring sustainable benefits to patients encouraged

Monitor‟s approach may

stifle innovation

69

Recent changes to Monitor‟s role on

transactions

• Transactions requiring approval:

• FT/FT; FT/NHST

• FT mergers, dissolutions and separations

• Necessary Steps

• Majority governor approval

• Sufficient assurance there will be no licence breach

• Legal Steps

Statutory

Monitor must approve certain transactions if

satisfied necessary steps have been

undertaken

• Relevant conditions are CoS 3 and FT Governance condition FT4

All transactions

Monitor can use its licence oversight powers to protect

patients‟ and public interests

70

Recent changes to Monitor‟s role on

transactions

• No requirement to go through Monitor‟s full assessment process, treated as a significant transaction

FT merger assessment requirement

repealed

• Monitor will no longer set limit

• SoS to publish guidance

• Expect Monitor to be informed of any significant changes in NHS FT debt -this may trigger review in some cases

Prudential Borrowing limit

removed

71

Review of approach

We recognise need to review our current approach to reflect

new role and experience to date

1. Should we be aiming to stop transactions with

unacceptable risk?

2. Is there a clearer way to indicate risks of the

transaction?

• Transaction Risk Rating

• RAG rating

72

Review of approach

3. What sort of financial analysis should we undertake to

evaluate financial risks?

• central case v downside case

• do we need to look out further than 1-2 years?

• need to look at downside in the core business

In addition we will review our process to ensure regulatory

burden is appropriate

• thresholds

• scope

73

Developing an

effective and fair

payment system

Jason Mann, Interim Director

of Pricing

Price setting role split between

NHS England & Monitor

23 May 2013

Monitor will lead on:

Pricing methodology

Regulated prices

Local modifications

Rules for local

pricing and non-tariff

pricing

NHS England will lead on:

Scope and design of

currencies

Variation rules to

National Tariff

currencies

Close working

and agreement

Prices influence commissioner and provider

behaviours by driving improvement in quality of

outcomes for patients at same or lower cost

New role has

potential to

bring significant

benefits to

patients

Last decade has seen trend towards

national prices

2003/06

~60 prices for elective surgery, expanding to all elective care

2012/13

1300+ prices for Acute care

Future

Currencies being developed mental health, long term conditions….

Increasingly aware of issues with current approach:

1. Paying for activity may skew incentives

2. Cannot work across care setting

3. Reference cost data poor

4. Price-setting not transparent and prices volatile

Anecdotal evidence of increasing non-compliance to manage financial risk

locally

2003

Shift from block contract to nationally mandated prices

Capitation

payments

Pathway

payments

Capacity

payments

Adjustments for

patient-reported

outcomes

Payment per individual served by

provider whether they require

care or not

Single payment to cover entire

pathway of care, from diagnosis

to rehabilitation

Providers reimbursed on the

basis of capacity of services

rather than activity

Payments adjusted (or based on)

patient-reported improvements

and/or satisfaction

Spain

Netherlands

Sweden

USA

USA: rural

hospitals

Australia:

emergency care

Sweden: spinal

surgery

International reviews show many different

approaches used

Asked ourselves: “why are we

regulating prices?”

Providers Commissioners

Contract(s)

Patients

Weak incentives

Potential for conflicts of

interest

Potential for provider

and/ or commissioner

market power

Information

constraints

Complex

interdependencies

Two key

points

Not all reasons applicable to all health care services

Not unfamiliar economic problems

79

Heart transplants

Single

provider

Single or multiple

commissioners

Knee replacement services

Provider 1Single

commissioner

Provider 2

Provider 3

Patients need different types of care, which

may require different payment approaches

Relatively

standardised

Clinical consensus

High volumes

(c50,000 pa)

Lots of providers

Outcomes can be

measured

Highly complex

Low volumes (121

patients in 2009)

Maximum number of

providers nationally low

(7)…

….to satisfy minimum

safe clinical activity levels

Regulatory toolkit for pricing

80

Price single units

of activity (as

under PbR) with

enforcement

rules

Improving

Cost and

Quality

Information

Setting

Mandatory

Prices

Constraining

Prices &

Contracts

Setting

Reference

Prices &

Contracts

Assessing

Value for

Money

Collect good

quality data

and

disseminate

to help sector

with

contracting

LESS

INTERVENTIONIST

Determining

Allowed

Revenues

MORE

INTERVENTIONIST

Arbitrating

where Local

Pricing fails

Undertake

assessments of

efficiency and

quality to help

inform

contracting

Calculate and

publish “efficient”

prices and provide

model contracts

Set min and

max prices to

for contracting

(e.g. to prevent

race to bottom

on quality)

Rules for provider /

commissioner negotiation

and mechanisms for

arbitration if process breaks

down

Set revenues

for capacity or

currency

bundles (e.g.

capitation)

Our initial view: 3 broad divisions in

types of service

81

Scheduled

vs urgent

Scheduled services more consistent with exercising choice

Payment mechanisms for urgent services might need to

consider “capacity issues”

Complex vs

simple Complex services likely to have significant interdependencies…

….and low maximum number of providers

Reactive vs

proactive

Payment mechanisms to incentivise managing health issues

proactively likely to differ from payment mechanisms that react

to health care problems

1

2

3

3 key building blocks for tariff setting

82

Cost and quality

data

Compliance

Price-setting

process

Help

providers, commissioners

and patients make better

choices

Inform our pricing

Proportionate enforcement

Allow innovation

Educate and build

Enable providers and

commissions to enter into

longer term decision making

Proper checks and balances

PLICS

PROMS

Provider accreditation

Set clear expectations

Gather insights from local

implementation

Evidence-based decisions

Predictable pricing

Robust methodology

Reduce time lags

Block Principles Implementation

1

2

3

How you can help

83

Data, data, data… Begun move toward PLICS (more volunteers wanted!)…

…needs recognition of importance at senior level in providers

Emergency care Emergency care an immediate area we are reviewing...

…call for evidence issued this week

Discussion paper

on payment

system

How can the NHS payment system do more for patients? Published this

week…

…start of 12 month engagement on long term strategy for pricing

Consulting on

2014/15 tariff

New institutional and legal framework means new timetable for setting

prices…

…aim to consult on tariffs in autumn ahead of final tariffs published in

December

Informally engaging with sector in June on key issues for this year…

…feedback at an early stage appreciated

Monitor 17 may all presentations for website.ppt

Documents

Transcript of Monitor 17 may all presentations for website.ppt