The Foundation Trust Trap
The Carrot, the catch and the crucial imperative
Written by: Andrew Vincent, Medicology Ltd. Published: 3rd June 2010
Perhaps trap is too strong a word but itdoes imply something you fall into becauseyou didn’t notice it and at that level theword carries the meaning suitably well.Furthermore, the trap itself, whether bydesign or inadvertently, is particularly wellcrafted. So, what are we speaking of? Youcould call it a funding trap but we’d prefer todescribe it as the trap of self-determinationand it gives rise to some vital imperatives iforganisations wish to avoid being impaledon the spikes at the bottom.
Self-determination – the meaning
Self-determination is defined as freechoice of one’s own acts without externalcompulsion; and especially as the freedom ofthe people of a given territory to determinetheir own political status or independencefrom their current state. In our context, it canbe defined as Foundation Trusts effectivelycutting ties with the NHS ‘mother ship’,albeit constrained by a regulatory, Monitor,and with strict contracting requirements, infavour of going it alone or managing theirown lot with much greater levels of freedom.However, with freedom comes responsibilityand although 90% of Foundation Trustsare declaring a ‘green’ governance ratingto Monitor, we’d like to explore some ofthe less obvious issues arising out of selfmanagement.
The carrot
Foundation Trusts are described by Monitoras not-for-profit, public benefit corporations.Although they remain part of the NHSand provide over half of all NHS hospitaland mental health services, they are freeto decide their own strategy and the wayservices are run. They remain constrainedby the NHS core principles - free care, basedon need and not ability to pay – but arenot directed by Government, instead beingaccountable more to their local populations.
With Foundation Trusts status comes theability to be master of your own destiny,for instance they can retain their surplusesand borrow to invest in new and improvedservices for patients and service users. Thisis not an insignificant benefit and ask almostany coal face clinician whether they wouldprefer to be lead by Government or moreself-determining and you’ll find a strong votein favour of the latter.
For instance, should a Foundation Trustswish to focus on oncology, it can extendits cancer services by perhaps opening anew treatment centre, for which it mustseek, raise or identify funding in muchthe same way that a business would seekfunds to expand into a new market or fora major capital investment. Organisationsmust assess the likely ROI (return oninvestment) to ensure that they are utilisingtheir financial resources wisely and inmuch the same way so must FoundationTrusts. Perhaps the clue is in how Monitordescribes them “not-for-profit, public benefitcorporations” and, other than having toreinvest surpluses for the greater benefit ofpatients, they do operate in essentially thesame manner. The ability to determine astrategy, bring it to reality, generate surplusrevenue as a result of it and then see thatreinvested to improve the health of thepopulation and the success of the Trustis enormously gratifying and arguably anintelligent way to organise the delivery ofsecondary and tertiary health services. Butwhat if there isn’t a surplus...
The catch
122 Trusts now hold Foundation status (asof August 2009) and the above carrots willhave grown and sprouted in many of theminds involved both prior to the decisionto acquire FT status and subsequently.Furthermore, when most applied, 105 ofthese 122 gained their status a year or moreago with well over half more than 2 yearsago, the NHS remained firmly in the midst ofmandated funding increases, which meantthat if you could get your financial housein order to gain FT status then the futurelooked rosy indeed. The harsher reality isthat we are entering a more famine-likeperiod and this will have implications forthe all Trusts, let alone those with FT status.However, that isn’t really the trap.
If the exciting world of how to spendyour surplus is the carrot then the catch isundoubtedly that you also have the sameresponsibility for managing your shortfalls.A Foundation Trust with tight fiscal control,which arguably they all needed to gain FTstatus in the first place, can operate relativelyeasily whilst balancing its books. In timesof increasing funding, successful Trustsgenerate healthy surpluses and can developproactively to address need, demand, newtechnology and more. When funding iseffectively flat, the status quo remains stilland although you probably can’t invest inall the things you’d like, balancing is stillpossible. However, when the cost of deliveryoutstrips any funding increase, the Trustmust make efficiency savings or constrainactivity in order to maintain balance. Butthat’s not the trap either.
The trap actually stems from the widerstrategy for health. Concurrently with thepromotion of Foundation Trust status, theOur NHS, Our Future, Darzi-led movementhas gained momentum. As part of thatquality-cost-demand driven agenda,a differential funding system has beenimplemented, whereby hospital-basedepisodes are remunerated on a tariff-basedsystem and community care is directlyfunded. Consequently, activity conductedin the community setting is almost always‘cheaper’ than the same activity under thetariff-based system. Consequently, withincreased financial pressure and growingdemand there is not only an appetiteto make greater use of the communitysetting but growing recognition that if youstrip services of more simple procedures,diagnostics and care in general, then thereis too much provision at the secondary carelevel. Now that is a problem...
To be clear, across England, elements ofservices will move to the community,a movement that is already under waythrough PCT commissioning, practice-basedcommissioning and even the Any WillingProvider route too. For the ill-prepared oreven ‘sluggish’ Foundation Trust, that couldrepresent the undermining of financialstability at a service level and the need toask some very difficult questions aboutpost (redundancies) or even whole serviceviability going forward. Hang on, nobodymentioned that when we signed up...
The crucial imperative
The community movement is not one thata Foundation Trust can readily influenceand therefore, rather than futile resistance,developing alternative strategies becomesan imperative. To effect this, we also needto drop the traditional focus on tightgeographical boundaries and think of theNHS as an open market. For instance, if I loseinjections for rheumatoid arthritis to a GPwith a special interest, could I attract morereferrals for diagnosis? Typically, a hospitalservice serves the majority of its localpopulation and so those extra cases mayhave to come from outside its traditionalcatchment area and maybe run through anoutlying treatment centre – a competitivestrategy designed to ‘take business’ frompotentially a neighbouring FoundationTrust. See what we mean?
Now, if you are a Senior Manager in aFoundation Trust, you are probably thinking“yes, we know this...” and far be it for us tosuggest otherwise. However, we stronglysuspect that the challenge to be resolvedarises not from knowing it but fromaligning and coordinating the behaviourof your clinical services, who may well haveseen their role traditionally as including‘protecting the patients from the evil,money-saving managers’, resulting in oftencompetitive relationships, not collaborativeones. If an FT is to survive and thrive, thereare some conditions which need to be inplace in relation to the services themselves:
- They must act collaboratively withmanagers and senior managers – thereis no room for internally competitivebehaviour
- They must understand the market inwhich they operate – the majority havebeen so tied up with the day-to-day jobof delivering medicine that it has beendifficult to keep up
- They must understand and address thefuller picture of what constitutes servicesuccess in the modern environment – the6 core components of service success(ask!)
- They must apply as much attention toservice excellence in that wider form asthey naturally do to clinical excellence
The hard truth is that let aloneunderstanding the environment, mostclinical teams have had little training in thesort of strategic service leadership that isnecessary to drive services forward underthe current constraints, trends and widerhealth strategy. Furthermore, this runs muchdeeper than the Clinical Director. To truly excelin a truly demanding environment requiresa coordinated, consistent and effectiveapproach by the whole service i.e. everyonein it. The crucial imperative is that this needscreating within a timescale sufficiently shortto allow the Foundation Trust to adapt andproactively manage its business, rather thanfall on the spikes of the trap and be slave toreactionary cuts to balance books, resultingfrom this community-led funding erosion.Exciting times ahead.
