Exit, Merger and Recovery: Dealing with Nhs Providers in Difficulty

• taking action to prevent financial difficulties by recognising the warning signs, engaging appropriate experts, and intervening to avoid escalation is critically important • Monitor’s experience demonstrates the value of a rules based intervention regime that makes explicit what is expected of Foundation Trusts, and the consequences that will follow from failures of performance • a menu of options is available for dealing with financial difficulties, including cost reductions, the use of loans, the sale of assets, and service reconfigurations; taken together these options make up the NHS recovery regime • in the case of serious financial failures, there is also the option of merger by acquisition, and the experience of the Heart of England NHS Foundation Trust and Good Hope NHS Trust, described in this report, is the first case in which merger by acquisition has been used • market exit and insolvency need to be real options in order to create an incentive for Foundation Trusts to improve, but as yet there is no agreed exit regime, nor is there clarity about what insolvency means in the case of Foundation Trusts • the NHS and Monitor face challenges in enabling the government to meet its objective of enabling most NHS Trusts to become Foundation Trusts by the end of 2008, especially in the case of providers with large deficits • in some circumstances, it may be appropriate to create Foundation Trusts encompassing a number of hospitals in an area; as in the case of mergers, this will need to be reconciled with the requirement for patients to be able to choose between competing providers • the Health Care Commission, and the proposed new regulator of health and social care, need to work closely with Monitor on the safety and quality of health care, and in the process ensure that issues related to financial failure do not take precedence over concerns for quality and safety