Shine A Light

In the new NHS, what the private sector wants, it gets

Monitor, the lead regulator of NHS, is already easing the ‘regulatory burden’ borne by private companies enjoying the new market for healthcare in England. How does this square with the body's primary remit to "protect the interests of patients"? 

Richard Whittell
7 August 2012

When pushing its Health and Social Care Bill through Parliament, the coalition government promised that the companies it was encouraging to take a greater share of NHS work would be regulated into doing a good job. A beleaguered Nick Clegg said last May that the NHS would not be treated as if it were a utility "like electricity or telephones" and promised that the main duty of Monitor, the lead regulator, would be to “protect the interests of patients", rather than to promote competition as originally planned. But while Monitor has been keen to hold publicly-run bodies to account, its attitude to private ‘providers’ of NHS work has been more indulgent.Last Thursday, for example, the regulator used its powers to replace the chairman of the Bolton NHS Foundation trust after its predicted annual surplus turned into an unexpected £1.9m deficit. Merav Dover, Monitor’s Compliance Director, said they were acting to “ensure that all problems are fixed as quickly as possible for the benefit of patients” and said the Trust would be required to report on a regular basis so “we can hold them to account on the delivery of their turnaround plan".

Four days before, Monitor had released the results of its consultation on the new licensing regime for NHS, private and third-sector providers — the “new, key tool with which we will regulate providers of NHS services”.

In January, six months after the collapse of care home company Southern Cross threatened to leave 31,000 residents homeless, the regulator had proposed that providers looking to take over responsibility for essential services should not be allowed to borrow too much or be in too much debt, they should be locked into running services even if they turned out not to be profitable, and their finances should be externally assessed by credit rating agencies and external auditors.

This caused predictable outrage from healthcare companies, many of which carry huge levels of debt and have no desire to be involved in anything that is not going to provide a healthy return (these same companies are, of course, only too keen to loudly bemoan the debts and deficits of public hospitals). By May, ‘stakeholders’ including Circle, Virgin, Spire and Bupa, supported by industry associations including the NHS Partners Network and the British Private Equity and Venture Capital Association, had all sent feedback to Monitor, saying the proposed regulations were “overly burdensome”.

In response, last week the regulator announced it was going to drop them. The proposal “to police the lending decisions of private institutions”, for example, is now felt to be “inappropriate” as companies are already subject to “normal corporate governance oversight”, while restricting indebtedness is, it turns out, “only appropriate in very specific conditions”. It was also “excessive” for Monitor to suggest companies should not pay dividends to its shareholders if “continuity of provision” of an essential service is “threatened”.

In many cases Monitor has not just yielded to the companies’ demands, it has given them even more than they ask for. One unnamed respondent questioned “whether in conjunction with other proposed measures such as credit ratings and limits on disposal” the condition to limit indebtedness was required. Monitor agreed that, given these other proposed measures, a “general condition on indebtedness, applying to all licences, is not appropriate.”  

But read a few pages earlier in the report and it turns out the regulator has decided the other measures are not, in fact, appropriate either. It is “an unnecessary regulatory burden” to expect a company running essential healthcare services to submit an annual report from auditors or be assessed by external credit rating agencies. A simple certificate signed by the company’s own board will now be sufficient to prove financial health. So it wasn’t right to restrict indebtedness because other measures were being taken. But, even now these measures aren’t being taken, it’s still not right!

Given that the regulator is run by ex-McKinsey and KPMG management consultants, and heavily lobbied by those same companies, it was never likely to be as strict with them as the coalition liked to suggest. But Monitor isn’t acting like a utility regulator, as Clegg feared. It’s worse than that. Monitor’s behaviour makes even Gordon Brown’s infamous ‘light touch’ approach to regulating finance seem severe. The credit rating agencies it has decided would be too burdensome, for example, are those that were so close to the banks they rated Lehman Brothers as a safe investment just days before it went bust.

The main concern isn’t that the coalition’s chosen regulator is in the pocket of the people it is supposed to be regulating – do we really expect anything else? What’s really worrying is that the companies’ fear of even the slightest restrictions shows the precariousness of their businesses, and therefore the risks to the services they are taking over. With their huge debts and borrowing costs, aggressive tax avoidance and private equity and hedge fund-owners, the companies’ ‘innovative financial structures’ come straight from the riskier end of corporate profiteering.

And the government and its regulator apparently see no problem with that. 

Had enough of ‘alternative facts’? openDemocracy is different Join the conversation: get our weekly email


We encourage anyone to comment, please consult the oD commenting guidelines if you have any questions.
Audio available Bookmark Check Language Close Comments Download Facebook Link Email Newsletter Newsletter Play Print Share Twitter Youtube Search Instagram WhatsApp yourData