Shaping the Foundations

Article for Health Matters March 2004

Martin Rathfelder & Dr Pauleen Lane

Escaping from the frying pan of Whitehall control into the fire of local politics may be a difficult transition for the first wave of foundation hospitals. Some of these august institutions, originally erected by public subscription and managed by local worthies, were nationalised in 1948, promised independence in 1990, and have been reconfigured every other year since. What effect will this introduction of democracy have on them? What does a survey of Foundation Trust status bids reveal about their plans for stakeholder involvement – engaged participation or illusory diversion?

What are Foundation Hospitals for?

The motivation for the establishment of Foundation Trusts seems to have come initially from managers who wanted to be free from control, encouraged by politicians who wanted to be free from blame. Professor Paul Corrigan, formerly of the Public Management Foundation, and now Special Adviser to the Secretary of State for Health – both Alan Milburn and John Reid – is alleged to be responsible for formulating the idea.

Many 3-star Hospital Trusts have jumped onto this bandwagon, reasoning from the experience of previous reforms that benefits will be made available to the first wave institutions which are denied to laggards. It is clear from the bid prospectuses that not all would-be Foundation Trusts have fully understood the concept as it has developed. But they may have recognised the guidance issued by the Department of Health as echoing almost exactly that issued to the first wave of NHS Trusts in 1990 (when Kenneth Clark is reported to have said that hospitals did not have constituencies).

In the policy tussles over Trusts in the last two years their proposed freedoms have considerably reduced, But notions of community ownership and mutualism have developed under the influence of Hazel Blears, Ian McCartney and the Co-operative movement (in a rather unexpected alliance with the Institute of Directors ). According to Peter Kellner, Mutualism represents the Third Way, the essence of New Labour. Whether Foundation Hospitals will accord with the notion that individual and collective well-being is obtainable only by mutual dependence remains to be seen. Realising this idea in organisational form has not been easy. Utopianism has been more evident in the co-operative movement than effective mechanisms capable of standing up to the political and economic pressures of a capitalist market economy. Mutualism, community ownership and not for profit status are not identical. It seems likely that Foundation Trusts will have far more in common with existing Not For Profits like housing associations, charities, and chartered corporations than with any mutual.

The proposed governance arrangements have been criticised as inadequate:

“The arrangements are wholly inadequate to ensure that these institutions are really held to account by local people. The new “members”, who will be the legal owners of foundation trusts, will be a self selecting group drawn from a constituency proposed by the trust itself. The three-tier governance structure, in which the members elect representatives to the governing board, which itself only has a loose influence over the real holders of power – the management board – means that most members will be far removed from decisions about services”. Democratic Health Network

“The governance framework for foundation trusts will not lead to greater local accountability or social ownership. For example, foundation trusts will be able to run with only a very small number of members in relation to the population that uses them. UNISON is concerned that foundation trusts will not represent the communities they serve.”UNISON

If the alternative is the status quo, where non-executive members of Boards are appointed by the NHS Appointments Commission and are accountable to nobody except the Secretary of State, it is not clear why these critics prefer it.

There are not going to be sudden changes: the Act provides that there should be a transitional period during which the existing Non-executive Directors of the Trust become directors of the Foundation Trust for a year or their unexpired term of office, whichever is longer.

Role of the Regulator

The Independent Regulator of NHS Foundation Trusts is required to scrutinise the proposed constitution and governance arrangements before a Foundation Trust is established. It is not clear how he will evaluate proposed governance arrangements, except as a point of appeal for any election irregularities. Nothing directly comparable exists in the UK, because these organisations are asked to set up their own systems of governance. Local Authorities do not set up their own constituencies – the Boundary Commission for England does it for them against notionally uniform criteria. Parent Governors of schools are elected (if there are enough candidates) from a constituency which is fairly clearly defined and from which all members are invited to participate. Perhaps more comparable are the ballots of parents and prospective parents on the future of selective schools and the votes for the transfer of housing stock away from local authorities, where existing but not potential tenants had a vote. However hospitals are much more complex than schools or housing services, and what is on offer here for democracy is an ongoing responsibility, not just a one off event. It remains to be seen how much involvement in the running of hospitals patients and the public want, and how much the institutions can cope with.

The Secretary of State is responsible for making Regulations as to the conduct of elections for the Board of Governors. The Department of Health has now published guidance on the electoral process to the first wave of applicants, although the detailed regulations are not yet available.

From Wyre Forest to Tatton

The first consideration for these new organisations will be to establish a membership. This will depend on their own idea of their stakeholders constituencies.

We envisage two possible approaches by Trusts:

The Royal Marsden rather ambitiously proposes to include the whole of England, but most of the Trusts claim less territory. The Act specifies that there must be a minimum number of members in each constituency, but doesn’t say what happens if insufficient are recruited. The constituencies will overlap, so in some cities the busy citizen could be a member of up to a dozen different Foundation Trusts. Given the drift towards a market economy these trusts may have divergent interests and it will be interesting to see if hospitals have to canvass support from the public for plans which may not be welcomed by neighbouring institutions who are canvassing for rival plans.

The requirement that members may be obliged to cough up a pound has been dropped, so the possibility of signing up people on an opt-out basis is now viable. University Hospital Birmingham are proposing to invite all new patients to become members in this way and expect to be able to recruit up to 10,000 a week. If successful, of course, recruitment on this scale would answer those critics who claim that a Foundation Hospital will become the property of a self-selecting oligarchy.

This way is unlikely to lead to as much commitment to the organisation as the opt in method. There are real organisational and financial costs to mass democracy. Birmingham are expecting to pay up to £3 per member per year, so the annual bill could easily come to £1 million for a large hospital. It seems likely that the work will be contracted out, possibly to local authorities.

In the published prospectuses of the 25 remaining candidates for the first wave, all staff of the organisation are proposed to be members, normally including contractors and temporary staff. Some propose excluding those with short term contracts – likely candidates for sex discrimination claims. Some include volunteers within the staff definition. Proposals differ in whether the staff have to apply for membership or will have it given to them, some even propose that staff be contractually obliged to be members.

Most do not have an age limit for membership and some explicitly envisage the possibilities of children being governors. Others require their members to be over 16 or on the electoral register (which means over 18). Many have a touching faith that the whole population of their area will be on the electoral register, which is unlikely to be true. Anyone who has ever tramped the streets at an election will know that amongst the most deprived and mobile parts of the population the proportion of people in an area who are on the electoral register can be as low as 50%. Some people are not supposed to be on the register because they lack the necessary citizenship. The name on the register and that given to the hospital may not match. The most common public membership proposal is for all patients treated in the last three years plus all residents in a catchment area. Most proposals make some provision for carers either in addition to or instead of patients, which could be a problem if there is an argument about who is a carer.

This membership is then usually combined into one constituency. If there are separate constituencies by category people have to choose which one they are in – you can’t be in more than one.

15 out of the 25 propose to divide the governors representing the public into constituencies, some on a geographical basis others by age, ethnic group or medical condition, yet the Act only permits the public to be divided geographically, and provides that electoral wards must be used. Many of the documents show a lack of familiarity with the technicalities of running elections, which require firm and unambiguous definitions, so some of the constituencies overlap or lack operational definition. Some propose to use PCTs as the constituency – not realising that PCTs are based on registered, rather than resident, population and therefore do not have definable boundaries.

Several suggest that anyone who has ever been a patient or carer could be a member, or that anyone with a genuine interest outside the specified area will be considered, but it is hard to see how genuine interests could be differentiated from obsession, or whatever sort of ungenuine interest they want to exclude. Staff cannot be members in the patient or public category, but it is not clear how they can be excluded as the list of patients or residents would not identify staff, nor is there any indication what will happen if people change from one category to another.

Of course all this would be made much easier if we had identity cards. In the meantime, even the best data matching programmes will not weed out all people in more than one constituency – geographic or by category – and voting early and often may yet make a come-back.

Will voting make any difference?

There was a round of press speculation in January 2003 that “local NHS chiefs warned they were open to takeover by Trotskyists and other extremist groups” . It was not clear what prompted the story, and no evidence of entrism was produced, but clearly it would not be difficult for an organised group to make a big impact in a small electorate, especially if it is not divided into separate constituencies. However it seems more likely that the level of participation in initial elections may be so low as to be an embarrassment. The ten hospitals featured in the article claimed (at that date) 15195 members between them. There is clearly a danger that voting will be so low as to deny any legitimacy to those elected.

The most obvious organised group which might want to take over the board of a hospital would be the staff, whose interest is more enduring than that of most other parties. The staff constituency on its own is a small minority of the Governing Body, but even if they don’t break the rules by pretending to be members of the public they could recruit their friends and relations into membership quite legitimately. In the event of an industrial dispute of some kind it would be surprising if there were not attempts to involve the Governing Body on one side or another.

Up to now there have been no reports of any political organisations planning to run candidates for Foundation Hospital Boards, but it is hard to believe that in the long run they won’t. No politician will leave a platform for election to their opponents unchallenged. The guidance envisages candidates declaring membership of any political party and submitting statements about themselves and for this to be circulated to members.

The prospect of circulating material at public expense to large numbers of voters will also attract both conventional politicians and obsessives of all kinds. We are also likely to see electoral activity from the various patients’ organisations, some of which are large and well organised. Usually, of course, political organisation and influence is inversely related to age and infirmity. Those most dependent on the service are those least likely to get elected. Trusts are encouraged to recruit members from sections of society traditionally excluded, but it is hard to see them being able to do much in this direction. It seems more possible that members of Foundation Hospitals will resemble the members of the National Trust – affluent, white and middle aged, but leaving the governance of the organisation to the gentry.

There is a lot of political mileage in being seen to defend your local hospital, as can be seen in Wyre Forest. It is, however, unclear what the long term impact of Foundation Hospitals, and even more of the financial flows regime, will be on reconfiguration debates. Giving patients more choice may rapidly expose some institutions as not financially or clinically viable. If a hospital, or part of it, is in trouble we can envisage candidates standing on a “Defend our Hospital” platform, although it is not clear that success in such an election would necessarily help the institution’s chances of survival. Perhaps standing for election to the board of a rival establishment and attacking it from within would be more productive.

No politician wants to be seen to be closing hospitals, and many facilities which should have been closed on sound health grounds have been dramatically reprieved on the eve of an election. However if Foundation Trusts are seen as free standing players in a market place, it may be that a future Secretary of State will be able to take the attitude that if patients choose to go elsewhere such a hospital may close and it will be nothing to do with him.

The Wrong Foundations?

If we are moving to a health service with diverse providers and a market place of sorts it is hard to see why providers should be democratically controlled. Democratically controlled organisations, such as the Co-op, have not been more conspicuously successful in the market place than those more conventionally structured.

Local authorities are the biggest democratically controlled organisations in the UK. Opinions vary about their effectiveness, but for the past fifty years governments have worked hard to persuade or coerce them into separating their direct service provision from the elected side, which is supposed to commission or purchase services. The only example of a successful democratically controlled provider given by the DoH, Greenwich Leisure Limited, is actually employee owned, and has a turnover of around £10 million – a very different proposition from a Foundation Trust.

A better comparison would be with the regional consumer co-operative societies, many of which are comparable in terms of employee numbers and financial turnover with the forthcoming foundation trusts. There is also but one example within the healthcare sector in this country: the Benenden Healthcare Society, which has 1.2 million (consumer) members and owns and runs a hospital as a friendly society on a democratic basis. Its members are present and past public sector workers. Most hospitals do not have a clearly defined catchment area, and District General Hospitals in their present form are clearly not going to be with us in the longer term. More routine work will be handled in primary care and difficult specialised work will go to regional centres, serving a wide area.

Many other countries manage their healthcare provision by means of not-for profit hospitals often run by churches with state funding. But few other countries have such direct and centralised government control of healthcare provision – so Foundation trusts look more like a move towards the European norm from that perspective and not so radical.

Do we need a complex and potentially expensive structure to persuade us that we own the NHS? Most people think they own it already. Will this structure enable patients and the public to challenge the interests of professionals? An injection of democracy into the secondary sector will probably increase the power of hospitals at the expense of unelected PCTs. It is the commissioning organisations which are intended to deal with the needs of a defined area that should be democratically accountable. They are better placed to challenge the interests of providers. Roll on the Foundation PCT!