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Plans that would have imposed tough financial conditions on private companies that provide NHS services have been ditched by the health sector’s economic regulator.
Monitor, the watchdog, on Monday published a consultation document on a new licensing regime covering NHS, private and third-sector providers which drops three original proposals that had sparked private sector concern.
The new regime is intended to ensure that services regarded as crucial for patients – so-called “commissioner-requested services” (CRS) – continue even if a provider faced financial difficulty. It is, in part, a response to the collapse of Southern Cross, the care home provider, last year.
However, initial proposals alarmed the private sector, with concern centred on a suggestion that providers might face limits on the sums they could borrow and the amount of debt they could hold.
Another controversial proposal would have locked providers into running services even if they were not profitable.
The document published on Monday showed all three options have been abandoned. Research carried out by Monitor had concluded that “regulatory restrictions on indebtedness are only appropriate in very specific conditions, in particular where there may be a lack of effective spending control and debts may be subject to an implicit government guarantee”.
The idea that providers would have to accept a “cash lock-up”, as a guarantee that services would continue if a provider was in financial distress, is described in the document as “disproportionate, especially for licensees where CRS makes up only a small proportion of their total business”. And it was “inappropriate for us to police the lending decisions of private institutions, which are subject to normal corporate governance oversight”, the document added.
An earlier proposal for providers to obtain an external credit rating was also abandoned. Instead they will be subject to Monitor’s own risk assessment framework.
A Monitor spokesman said it had sought to balance the protection of patients if an organisation failed with the need to ensure “that we don’t create something that is overly burdensome and that might discourage people from providing services to the NHS, which is the last thing we want”.
David Worksett, director of the NHS Partners Network, said Monitor had made “a very significant step towards a workable regime from the point of view of the independent sector”. Its willingness to listen to concerns showed “the high quality of its approach”.
However, he cautioned that a lack of clarity remained on two fronts. First, the health department had yet to announce which areas would be exempt from Monitor’s licensing regime. Secondly, guidance to help determine the scope of CRSs had not yet been issued.