Foundation Hospitals

Lynne Jones MP - April 2003

After several years perpetuating Tory underfunding, the Government is at last putting big money into the NHS.   But it is so obsessed with the need to achieve short-term results like reducing waiting times for non-urgent surgery that it is subjecting the NHS to top-down reorganisation imposed under the guise of modernization and decentralisation.

The latest fad, foundation hospitals, came about after Alan Milburn visited the state-owned but privately-run Fundacion Hospital in Madrid.  He was impressed that Fundacion outperforms government controlled hospitals.  (Local unions suggest this is because the most costly and difficult patients are sent to a nearby fully public hospital and average working hours are 8% longer than normal!)  Milburn wants foundation trusts to “unleash public sector entrepreneurialism and innovation” giving accountability to local communities.  The Government is desperate to justify increased spending on the NHS from taxation, fearing that the affluent middle classes might be tempted to switch support towards more private insurance to get more “choice”.  Yet real choice can only be provided if there is surplus provision, which may be OK for general goods and services but inefficient and massively more costly when it comes to essential public services dependant on highly skilled staff and complex equipment.

Even the BMA has pointed out that foundation hospitals risk replicating the bureaucracies of the internal market in health care that Labour pledged to abolish and so ministers have propagandised that foundation trusts are in line with a co-operative and mutualist tradition.  This is a selective re-writing of history.  Co-operative societies are associations that bring members together for purposes of providing benefits to members and the sharing of profits.  By contrast, foundation hospitals would be hugely complex organisations delivering a public service.  They are supposedly to be locally “owned” but the Secretary of State has not explained how Members can ‘own’ the assets of new PFI hospitals!

Foundation hospitals will operate on a not-for-profit basis and will have a board of governors drawn from a self-selecting "membership community" of residents, staff and service users who have actively opted to become members of the trust.  Only three star hospitals can bid for foundation status, despite the government’s rating system being based on a limited range of performance indicators that measure quantitative targets such as waiting times and financial performance, not clinical outcomes and quality of care.  To counter charges that they will select who they treat and the services they offer, they will be licensed by a new regulator and required to deliver their existing range of services to national targets and standards, subject to inspection by the Commission for Healthcare Audit and Inspection.  There will be a cap on existing levels of private work and a new mandatory "national tariff" for all health care procedures will ensure that foundation hospitals cannot undercut other NHS hospitals (although this will raise other concerns that standard prices will introduce incentives to compromise on the quality of care).


Foundation trusts will be able to borrow from both the public and the private sector, and will retain any operating surplus they may earn.  Private sector borrowing will be under the control of the licensing regulator, who will rule on compliance with a borrowing code based on the hospital’s ability to service its debt.


In reality, the control on these so-called autonomous bodies by numerous quangos will mean that their “freedoms” will look more apparent than real.  The system is destined to lead to further voter apathy at national and local elections as the public becomes even more confused about where responsibilities lie.


Whilst foundation trusts will apparently be forbidden from “poaching” staff, the effect of the first wave of foundation hospitals in a situation of prolonged staff shortage seems likely to boost recruitment at these elite institutions at the expense of the rest of the NHS.  The effect of encouraging consumer choice in schools has been that the poorest schools enter a spiral of decline from which they cannot recover.  Is there any reason to suppose this will not happen with hospitals?


The future of the NHS should be about developing whole systems, not isolated institutions; about building networks across professional and institutional boundaries, not creating new barriers; about sharing IT and information, not reducing connectivity, and about getting more people treated in the community and in primary care, not sucking them into hospitals.  The danger with the reforms is that they do exactly the opposite and will return us to the fragmentation of the pre-NHS era and render public services ripe for privatization.  It is not surprising that foundation hospitals, like that other folly, the invasion of Iraq, have received more support in Tory circles than they ever will from Labour!

Acknowledgements to the Socialist Health Association


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